• ◦ This collusive episode had firms communicating through coded messages on one of the firms’ publicly accessible websites.

• ◦ Like many gasoline markets, prices were subject to price cycles; here, the cycles were on the order of one to two weeks. Communication was key for the market leader Circle K to signal to all firms when to raise price and initiate a new cycle. The way it did this was to provide a coded message on its website. Changing the “valid from” date for the recommended price to the current date signaled for all firms to raise their pump prices to the recommended price. While Circle K typically changed the recommended price, there are instances in which it was left unchanged and only the “valid from” date was updated. Within hours, all firms raised their pump prices to the recommended price on Circle K’s website.

• ◦ Circle K’s communication practice is neither express communication nor price signaling and is properly viewed as non-express communication for which there is a clearly identifiable announcement in the form of updating the “valid from” date to the current date.

• ◦ All collusion is, in effect, semi-collusion as coordinating on some dimensions intensifies competition on uncoordinated dimensions, of which some are always remaining, and that reduces the profitability of collusion. In this case of the Swedish market for gasoline and diesel, collusion occurred on pump prices which intensified competition on rebates and consequently induced firms to also collude on rebates.

• ◦ There are two crucial features of this market relevant to the cartel episode, First, while many consumers pay the pump price, large corporate customers, such as transport and taxi companies, received a negotiated rebate on the pump price. Second, at the time of the particular incident being examined, the normal mode of market conduct was for firms to collude on pump prices. The resulting supracompetitive price-cost margin on pump prices caused firms to compete aggressively for larger consumers through rebates.

• ◦ The cartel episode of interest pertained to firms coordinating to remove these rebates. In the legal case, the firms claimed the coordinated removal of rebates was exactly offset by a reduction in pump prices, so there was no net effect on their corporate customers’ prices and those customers who paid pump prices were better off.

• ◦ The case study’s analysis does not support this claim for there is found to be a return of the pump price margin to its initial level. Large customers who lost their rebates were worse off, while small customers experienced only a brief period of lower pump prices, before prices returned to their initial higher level.

• ◦ This case study illustrates the difficulties a cartel can face in getting out of a price war and identifies some of the obstacles to doing so related to market circumstances. It does so by closely examining a price war that upset collusion in Québec City in 2000.

• ◦ The episode started when an independent retailer chose to defect from the collusive agreement by lowering its price so as to increase sales volume and benefit from a price-support clause it had with an upstream supplier. This act triggered a price war that caused margins to go from five cents per liter to nearly zero and which lasted almost a full year.

• ◦ Using daily station-level price data, the case study shows the price war lasted so long because it was very costly for any firm to take the lead to return to collusive prices. The root of the problem was the high price elasticity of firm demand. Raising price by only two cents per liter above neighboring prices could result in a 36 percent loss of volume. Thus, a firm raising the price to get out of the price war would experience a significant drop in sales as it waited for other firms to match its increase. This deterrent to raising price was compounded by one of the leading firms having a low-price guarantee which tied its price to the lowest price in the market.

• ◦ This case study describes price signaling through a third-party data subscription service.

• ◦ Informed Sources provided a data subscription service to companies operating in the retail gasoline market in Australia. Each subscribing company provided its prices at a high-frequency (on the order of every fifteen to thirty minutes) to the Informed Sources online platform and was given access to all subscribers’ prices on that platform.

• ◦ The Informed Sources platform was supportive of collusion as it facilitated coordinating on high prices – by allowing for low-cost signaling of future prices – and monitoring for compliance with those high prices. The platform allowed for tacit and indirect communication, and collusion could occur without explicit and direct communication.

• ◦ Using data from a similar platform, FuelCheck, empirical evidence is provided that supports this type of platform having anticompetitive effects by reducing the risks and costs associated with price leadership while achieving a common understanding among firms as to the prices to charge.

• ◦ For policymakers, the case study underscores competitive concerns associated with price-sharing platforms. In particular, the speed and reliability with which communication was possible through the Informed Sources platform substantially removed the usual deterrents to firms’ using prices for signaling.

Reciprocating internal combustion engines rely on a piston-cylinder configuration to achieve a batch periodic conversion from chemical energy in a fuel to mechanical energy leaving an engine. In this category of energy conversion devices are included spark-ignition (SI) engines which may operate on gaseous or liquid fuels, and compression-ignition (CI) engines which may operate on liquid or a combination of liquid and gaseous fuels. As described by Lichty, the first example of an internal combustion engine was that of Abbé Hautefueille in 1678 using the combustion of gunpowder in a cylinder to move a piston and produce work. Renewable fuels and bio-based chemicals and materials are nothing new. They have served humankind since the dawn of civilization. And that there would be changes in how we power our transportation systems is also nothing new.

The introduction of new fuels into the market is a unique opportunity to take advantage of new fuel compositions to improve the efficiency and emissions of internal combustion reciprocating engines and alternative fuel feedstocks. However, there are numerous challenges that introductions of new fuels face before they can become first legal, then ubiquitous. This chapter reviews four different case studies related to changing fuel composition. In some circumstances, the fuel formulation was changed in seemingly minor ways, and resulted in the unanticipated consequences. In other cases, a fuel change was desired, but an unexpected barrier slowed the introduction of the fuel change. These case studies should be viewed as opportunities to understand the interdependencies that exist and factors that need to be considered when trying to change the fuel in the marketplace.

Reciprocating internal combustion engines rely on a piston-cylinder configuration to achieve a batch periodic conversion from chemical energy in a fuel to mechanical energy leaving an engine. In this category of energy conversion devices are included spark-ignition (SI) engines which may operate on gaseous or liquid fuels, and compression-ignition (CI) engines which may operate on liquid or a combination of liquid and gaseous fuels. As described by Lichty, the first example of an internal combustion engine was that of Abbé Hautefueille in 1678 using the combustion of gunpowder in a cylinder to move a piston and produce work. Renewable fuels and bio-based chemicals and materials are nothing new. They have served humankind since the dawn of civilization. And that there would be changes in how we power our transportation systems is also nothing new.

The introduction of new fuels into the market is a unique opportunity to take advantage of new fuel compositions to improve the efficiency and emissions of internal combustion reciprocating engines and alternative fuel feedstocks. However, there are numerous challenges that introductions of new fuels face before they can become first legal, then ubiquitous. This chapter reviews four different case studies related to changing fuel composition. In some circumstances, the fuel formulation was changed in seemingly minor ways, and resulted in the unanticipated consequences. In other cases, a fuel change was desired, but an unexpected barrier slowed the introduction of the fuel change. These case studies should be viewed as opportunities to understand the interdependencies that exist and factors that need to be considered when trying to change the fuel in the marketplace.

This chapter starts by outlying the key characteristics of oil use, including: i) The history of oil; ii) Where oil resources are currently located across the globe, also with a focus on the difference between conventional and unconventional resources; iii) Technological aspects of oil exploration, production and transport; iv) Global oil production, consumption and trade trends. It then analyses the geopolitical issues associated with oil, including: i) How changes in the locations of oil supply could affect global security; ii) How changes in the locations for oil demand could affect global security; iii) The current “chokepoints” in transporting oil supply to users, and how their risks could be addressed.