Research Paper on:
Gas Pricing and Cenex Case Study

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an oil refiner owned by several farmers cooperatives in the upper plains region of the United States. It serves customers in the Wyoming and Montana region, where it also  historically obtained most of the crude oil it refines. Canadian fields also supply Cenex, with a crude that is higher in asphalt content than is that of the more  southerly region of Cenexs operational territory. Expansion of the federal highway program in the early 1980s resulted in a significant price increase for  gasoline in the form of a federal tax increase of more than 100 percent. Cenex believed that the demand for gas would decline in the face of rising prices  and that the governments interest in the nations highways would increase demand and therefore the price of - asphalt. The purpose here is to investigate those beliefs.  Pricing Issues One of the principal components of Cenexs decision to focus on asphalt is  its belief that demand for gas will decline as prices increase. The federal government is increasing per-gallon tax more than 100 percent, from 4 cents a gallon to 5  cents a gallon. This tax is paid directly by the consumer, and producers have few choices available to them in efforts to maintain steady pricing. Cenex could reduce  its gas price by the same 5 cent increase and so hold pump prices steady, but such an action is not one conducive to company growth. The action would  decrease revenues immediately, while offering the company no recourse for the future tax increases that are certain to come. Cenex is correct in