I'm not quite sure how to react to this display of corporate loyalty (in the "update"). So the distributors are "notoriously greedy and secretive" and struggling gas station owners are "gouging" but the oil companies, his employers, are nothing but noble paragons of virtue! Of course, why didn't I realize it before?

I've got some friends who work for Microsoft and they're the same way. They'll talk your ear off about how the company is unfairly maligned on the net. I guess there's something to be said for allegiance to the team.

As far as his claim that refineries can't raise prices because they are bound by contracts, I believe that's only part of the story. After all, we all know that many refineries are shut down, hence they aren't fulfilling their delivery contracts. Of course there are probably clauses in the contracts for "acts of God" and such, but that still leaves the distributors up the creek. What do they do, if their contracted-for gasoline is not being made available? Do they just go out of business for a while?

No, I believe they have an alternative. They buy it on the spot market. The truth is, although as the insider says much gasoline is sold via contracts such as those traded on the Nymex exchange, a certain fraction is held back and is sold on the spot. This allows for handling variations in demand and unforeseen circumstances. I don't have informed knowledge of the details but that is how these markets generally work.

Prices float in a spot market and are no doubt very high right now, as all the distributors who have been cut off because their refinery partners are not delivering on their contracts fight over the limited pool of available spot market gasoline. This drives up the price, produces a windfall for those refiners which are lucky enough to have some excess capacity, and raises costs for the "notoriously greedy and secretive" distributors.

It may well be true that the distributor market is not all that competitive and many localities have only one or two main distributors. This means that if a distributor is facing high costs, his competitors may be able to take advantage of this and raise prices on their own. So there probably are some cases where distributors are profiting from shortages even when their costs aren't excessive. But ultimately the high prices must be stemming from where the shortages are happening, which is at the refineries.