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http://www.caranddriver.com/article.asp?section_id=30&article- - _id=8068
For ghulet; apparently your memory is fogged by your right wing slant. As far as record high prices go, just about anything you buy today that is mass produced is cheaper than it was 10-20 years ago in either real dollars or inflation adjusted. For example, I remember my parents bought me a bike about 20 years ago for $125.00, I could buy a bike today of better quality with better features for less than $100.00. Go look around in your local discount retailer, (ie Wal-Mart) pull an item off the shelf, some quick examples (lawn mowers, camping tents, fishing poles, shoes, clothing, etc.) all these items can be bought for the same or less than they were 10 years ago.
This is all about to take a turn for the worse, as many industries are starting to raise prices due to the increased shipping costs from the high price of gas.
With the way the truck has been guzzling, I dunno how many more loads of firewood I'm going to be running down to my Mom's this summer! :-(
But I digress, so prices on some basic consumer junk has gone down (so we should thank Wal-Mart for that?), but nobody is thanking Bush (or Clinton or any other recent president) for those particular lower prices, now are they? My point was, why blame the president in particular for gas prices? Simple.
There is my exact point, Exxon earns a profit at over 2 times the rate Wal-Mart does."
Wow! Not only wrong, but dead wrong. Ok, so my post says "Wal-Mart tops the Fortune 500 list (ranked by revenue) and most likely out-profits all the others, too." So in my world of reading comprehension, that statement means I was certain of their ranking (which is done by revenue) and sure enough, Wal-Mart indeed tops the list. I was confident, but certainly less sure about the profit. You gladly corrected me. My apologies for not going to Fortune.com to confirm.
At any rate, I still say my point is valid. Wal-Mart substantially lower margin makes perfect sense, when you consider the investments it makes in striving for near perfection in inventory management and the sacrifice on margins for each products to assure the lowest price.
So, I admit, my thinking was way off in what Wal-Mart's profit was vs. that of ExxonMobil. After further thought, their business models, of course, are totally different. But, my point is the same: Wal-Mart strives to generate profit through volume and even though the stuff is cheap, we all know they are making a profit, right? My thought on that is the same as others think of gas. If Wal-Mart can sell stuff that cheap and still make money, surely they could sell it cheaper and just make less, right?
My point that you seem to be missing is that if Exxon and the others were willing to get by on a smaller profit margin gas prices would be much lower.
Why does a lower profit margin make sense for Wal-Mart, but not for Exxon?????
Like I said, wait till next year's Fortune list comes out and every oil company reports record profits.
Somehow you just expect me to smile and say "Its okay, that's part of their business structure."
Maybe I should quit complaining and buy some Exxon stock.
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Regulars now is is 1.779-1.799 for the three majors-Exxon, Citgo and Shell. Off brand is 1.719. Major brand premium is 1.999!
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Because, (and I know you may pick this out), the business structures are different. Wal-Mart chooses to sacrifice margin to generate sales. I am positive somewhere, toiling away, is a computer that determines how low a price can go. Too low and margin is too low; too high and sales suffer. Plus, we're talking about Chinese made TVs, child-sewn T-shirts, whatever. Not exactly hard to get high ROI here. OTOH, oil companies, as I've said before, need bazillions of dollars to find new oil (you know, reducing dependence on OPEC would be nice), get to that location, drill, ship it, etc. And this isn't the kind of stuff you can offhshore to Bangalore. The way I see it, the profit they make is the reward for the risk. Wal-Mart runs a relatively low-risk, high-volume operation.
"My point that you seem to be missing is that if Exxon and the others were willing to get by on a smaller profit margin gas prices would be much lower. Why does a lower profit margin make sense for Wal-Mart, but not for Exxon?????"
I DO see what you're saying. If Exxon makes that much profit, I can see why people feel they can/should lower their prices. But, can't the same case be made for Wal-Mart? Like I said before, Wal-Mart IS making a profit, so surely their products could still be cheaper. I need to feed my family, why shouldn't they sell hamburger for less? Who are we to say what is and is not appropriate profit? "$20 billion, that just insults me--$10 million seems fair. Price your product accordingly." Is that what you're talking about here? That, at some point, profit becomes too high, so for the good of society, lower your price, make less money? Is this Russia or America? I knew I should have taken that left turn at Albuquerque. And, you want to talk about profit, where is your ire for drug companies? People need these drugs, probably more than they need gas, so why should Pfizer report record profits? For the same reason as oil companies. High risk. For every Lipitor or Viagra, there's probably hundreds of others that they invested millions or billions of research into that ultimately don't work or are not approved. In the same vein, for every large, sustainable oil field Exxon finds, they probably spend billions scrounging around some back-assward hole in the ground, only to find nothing.
I can't reiterate it enough--I have no personal or financial interest in my argument. I just think that, in America, you have a right to be rewarded when you take a risk. If you don't like the price of a product, don't buy it or use less. I do the same in other areas--I eat Porterhouses a lot less often than hamburgers.
Exxon should be looked on as saints compared to the drug companies.
My point still stands, gas could be, AND SHOULD BE, much cheaper if the oil companies were willing to not line their pockets with so much cash.
Wal-Mart has many "risks" on expeditures of their capital, (ie. take their recent fight to expand into California). The "capital risk" is a convenient excuse for the oil and drug companies to continue screwing the American public.
I realize we don't live in Russia, but I still don't believe the "Gordon Gekko" philosophy of "you can never make enough money regardless of the consequences" typifies the American ideals. I was always raised to believe we should help those less fortunate than us, not profit from their misery.
I totally agree. I realize it isn't fair to say "don't drive" or even "don't drive that vehicle". But look at the excerpt from catam's post after yours and see my reply...
"My point still stands, gas could be, AND SHOULD BE, much cheaper if the oil companies were willing to not line their pockets with so much cash."
SHOULD be? I'm sorry, but I truly do not understand this. I don't understand why you think you get decide how much profit is too much. Is there a "too much" guideline only on things we "need", so drugs, gas, etc have a "too much" threshold, but jewelery, furniture, boats and clothing (all very high margin items) do not? Don't care so much if I overpay for the La-z-boy, but pretty upset when gas is over a $1/gallon? I mean, sure, I do see your point and to an extent, it's valid and I'd even agree. But, there is a difference between selling a product that is sold at a high margin because the market bears it and a product that is sold at a high margin through illegal means (diamonds, anyone?). There is an oligopoly in oil in this country, but it doesn't mean it's illegal or even gouging. It's a response that would occur with any product. High demand, driven by a recovering US economy that has not shunned low efficiency vehicles, a Chinese economy that's exploding and a shift in electric production means that even if supply could keep up, there's no guarantee prices would fall.
"Wal-Mart has many "risks" on expeditures of their capital, (ie. take their recent fight to expand into California). The "capital risk" is a convenient excuse for the oil and drug companies to continue screwing the American public.
I realize we don't live in Russia, but I still don't believe the "Gordon Gekko" philosophy of "you can never make enough money regardless of the consequences" typifies the American ideals. I was always raised to believe we should help those less fortunate than us, not profit from their misery."
Certainly, any business has a degree of capital risk. But, Wal-Mart's risk--CA is a great example is nowhere comparable to that of oil (or really, drug) companies. I am not cynical enough to believe that we are being "screwed" in the manner you're talking. As far companies reducing their profit so as to not create misery, that's boo hoo, crybaby nonsense and I will not buy it. At any one time, segments of the population will be poor or struggling (I was one of them, could argue I am now!!) and whether Exxon makes $28B or $5 isn't going to change that.
The company I work for (insurance) can make $2B in one year, but lose $6B in another. I am more or less vilified as the face of that company, but nobody's happier see us write that check than a person whose house has burnt down or car has been totalled. We make millions of dollars of contributions every year--not to snooty opera houses or the protection of the arts or some other faux charity. It's the American Red Cross, the Ronald McDonald house, training arson dogs. While a business's purpose for operating may be profit, getting screwed is not the only side effect.
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Man!
I'm sure that gas prices will come up at the chat tonight...
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Coral Springs is a suburb of Ft. Lauderdale.
The Sandman :-)
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I haven't checked gasoline prices since Sunday, when I filled up my pickup down in Southern MD. The gauge on my '79 NYer is getting pretty low though, and I know I'm going to be dreading that fillup, especially with a 21 gallon tank and a preference for mid-grade!!
Bottgers... I believe that if the government steps in to regulate or cap prices, we will see sudden "supply shortages", rationing, etc. This is like the mid 1970s all over again.
I absolutely agree. The problem (if there is a "problem") is the wholesalers will call the station ahead of time and say "price is up 6 cents", so when the next truck arrives, they can price it accordingly. If the gov't regulates the price, they would have to do so WAY, WAY, WAY back in the supply chain, perhaps at the refinery level.
If they don't and the regulate the stations, what station would want to sell gas at the gov't demanded price when the wholesale price might eliminate what little profit they already make? Let's say the station makes 2% profit now and the gov't regulates the price to the point where their profit is .5%. Why would they bother? They'd restrict how much they sell, in hopes that prices could rise and they could resume selling normal amounts at regular prices.
At any rate, the bigger problem is putting this regulatory structure in place. In 6 mos to a year it would take to do that, oil prices could fall back, gas prices settle at a lower level and that all would be for naught. Government controls only work when a true monopoly exists-that's why every state has a utility commission. A free market economy, by its nature, will allow a product to find its proper price. Now, the current price is what the market demands. Gov't interference screws those market forces up and in the long run, can make things worse.
Again, check it out--futures traders are bidding up the cost of oil, to nearly $40/gal. Oil companies can't control that.
Good grief. They're called periods. And, they don't bite. Anyway, I've heard this theory before and it's interesting. I remember being a senior in college (1998) and that was the last time I remember (clearly, anyway) gas being below $1/gal. However, I have seen gas prices come back down substantially after an period of increases. Gas a couple years ago was perhaps $1.30. My point is though, is why shouldn't "the oil gods end up getting the prices they want"? If you made a product, would you not have an idea of what the selling price would be? And if so, wouldn't you want to get that price? Why is this unfair?
I'm going to continually do so until proof is presented that if not gouging, that a systemic pattern of criminal behavior is taking place to distort the market in a way that does not allow natural market forces to set the price. That means, the oil companies are colluding along with the entire futures trading industry to manipulate the price of oil. That means, the refining industry is deliberately holding back capacity on high demand fuels (such as gasoline)to use low inventories as an excuse, rather than a reason for increasing prices.
Can you do this? Can you PROVE that an entire industry predicated on supply the world's largest economy with oil and oil-based products has somehow manipulated every segment of the process from exploration, to production, to refining, to delivery, to retail? If you can, you get a bright gold badge and I will never argue this again. Or, is it, as I highly suspect, simply hyperbole? "Man, gas prices are outta control--someone's gotta do something". That's hyperbole and it sure sounds like what you're saying.
Until presented with evidence to the contrary, I have confidence in a capitalist, free-market economy. This confidence is never perfect, (thanks, Enron, Worldcom, Adelphia, and Tyco) but it's easier than assuming the worst.
Why do we continue to belabor this point, while driving big SUVs and taking them empty to the supermarket two blocks away? These behaviors are pretty much unique to the good ol' USA, folks. We love cars, love gasoline, don't really mind spending, but if some force we don't completely understand raises the price of our laziness and convenience by ten percent or so, we freak out, at least here. Please. Again, compare the cost of your 'personal' fuel and its increase to the rest of your spending. Is it really so significant? I'm not saying 'don't wonder or not think about it', but it's something we can all control a bit, much like a mild addiction. For most of us, though, an extra ten or twenty percent compared to last year isn't breaking the bank. Be thankful our fuel is as cheap as it is, for it is not anywhere else.
Santa Fe $1.89
El Paso $1.75
Amarillo $1.80
Denver $1.85
Durango $1.92
Las Vegas $2.16
Flagstaff $2.04
Tucson $1.99
227.9 this morning for regular!
I hear Costco is 10 cents less.
It's having an effect on my driving habits, as well. Today, my grandmother, uncle, and me rode down to my Mom's in his '03 Corolla. Any other time, I wouldn't have cared if we drove the Intrepid, or even something that was more of a guzzler like his truck, my truck, or, God forbid, my New Yorker!
For some reason, my uncle was getting into the habbit of gunning that little Corolla, and I'd mentally cringe every time he did it, just thinking of the gas he was wasting! Usually when I start thinking about fuel prices, my habits change to the point that I'm as gentle on the throttle as possible!
Also saw my godmother today, who drives a 2002 (IIRC) Durango, with a 4.7 V-8. She says that all of a sudden, she wishes she still had her Intrepid!
Prices go up without justification. There should be a publicized documentation of the reasoning behind every increase.
Of course, the only readon is profit padding, so they can't contrive anything.
I call it market response. OPEC has, for a long time, declared it wants to keep oil in a range of prices, to the best of its abilities. If commodities traders irrationally bid up the price of oil, you expect them to pump more to reduce the price? A price that increased for reasons beyond their control? Anyway, I can live with an agree to disagree situation here, as I can see neither of us wants to or will budge from their position. I think you're irrational and you might think I'm blind or naive. Either way, I don't need to keep arguing. It's ok and I hope we're cool.
"We haven't done much to counteract their demands, capricious or not. We're still driving guzzlers, because in comparison to our incomes and other consumer costs (especially housing at this point), gas is STILL VERY CHEAP HERE."
Exactly! Think about it. You have a product people use without really thinking. Use it as inefficiently as possible and as much as possible. Would you not want to sell that product for a price as high as you could? This is not the Salvation Army oil company. No company should feel they have a responsibiity to sell their product as cheap as possible, demand notwithstanding.
"Prices go up without justification. There should be a publicized documentation of the reasoning behind every increase."
Gah! This? I just have no response for. Well, one. I want this for every product. Milk went up to $3.29/gal without justification. I want every farmer to tell me why. Right. Now. Levi's went up to $40/pair. I want to know why. Boggles my mind, I tell you.
Maybe prices will go up and up until some crooked cronyistic execs start regretting their decisions. They must have great personal security teams, as they have to be growing less popular by the hour
87 octane 2.23.9
89 octane 2.33.9
91 octane 2.43.9
The tree huggers are delighted, not realizing the price of their granola is going up too...
Heh. I sulk with shame under your critcism. Why exactly is the "difference...obvious"? You're saying oil is something singular onto itself? That price changes in other products can't be fairly compared? Why not? I prefer milk to calcium supplements or scrouging around to find other foods that have it. To me, milk is as important as gas. Thus, if milk goes up, I want a full accounting of why! Somehow, you've decided, by unilateral decree, that not only do you demand a full accounting the reasons for a price change in gas prices, but you have the gall to say that only gas prices should have that requirement? That if I use a comparison in any other commodity, then it's silly talk? Talk about boggling the mind. Please...a spike in the price of milk is no different that a spike in the price of gas.
"Just because you can't quantify the factors that are contributing to the recent spiking in prices...every factor has to have a number assigned to it, and it has to be relatable to other similar events. We all know these numbers will never and can never be produced."
Has to have a number assigned to it? Has to be relatable? Goodness. I apparently missed the memo where virtually every member of the Depts of Energy and Justice, the SEC, the President's Council of Economic Advisers and any other potentially important person all died and it was decided YOU get to direct the economics of an entire industry . My bad. As far as will never and can never be produced, it's not because of some insidious plot to hide the truth--it's because you are asking the industry to tell us why the price of gas changed in any particular market on any particular day and not only why the price changed, but why the factors that changed the price, changed. Honestly, how could anybody provide that info? It just doesn't make any sense to me, what you're asking.
Seriously, anyway. I won't debate this with you any further because while bottgers and I disagree, I used an analogy to prove a point and you basically, say "no, no, no my irrational demands only apply to what I say they apply". How can I even argue with that?
"but you have the gall to say that only gas prices should have that requirement?"
Yes, I do. Show me another commodity with such influence over the entire economic spectrum that has similar pricing activity as gasoline. Even with your amusing example, milk....I can go buy milk at an upper end store here for $3.50-$4 a gallon...or I can get it at countless gas stations or Wal Mart for $1.99. Hmmmm
"Honestly, how could anybody provide that info?"
Are you joking?
Of course it will never be required...money buys laws, and those who make the rules aid money. This isn't exactly a free market, and not every change in gas prices is on the up and up.
And the price of milk doesn't go up every day or so $.02 or $.03 like the price of gas is now going.
Maybe I'm confused here and since you seem to know more than I do, please help me. And one thing, please leave out any sarcasm if you decide to answer me, it really makes one look foolish.
The Sandman :-0
Back to the economics of things, demand for gasoline is highly inelastic, which means the following things...
A rise in price means a smaller fall in demand (i.e. we really don't stop using oil)
Because there are few substitutes...
The upside is that commodities that are inelastic with regards to demand are priced relatively cheap.
Compare that with an item like the cars that we use the gas in, which are elastic goods. Changes in the prices of cars result in a larger changes in demand for the product, because there ARE many alternatives to any particular product, but the products are relatively expensive.
The supply side of gas is also inelastic in nature... price changes don't have much change on the quantity of product supplied. Again, because there are very few substitue products.
Unless we drill for more oil, which is a costly proposition, and increase refinery capacity, also a big buks item, we the consumer of the product can do almost nothing about the supply side short term. Just thinking out loud here...But it sure seems like we could do something about the demand side. Higher mileage vehicle is one choice, but I'm thinking even simpler than that. Find a way to eliminate ONE trip with your car during the week that you really don't need to take, or combine two errands into one trip. That would start backing up product in the supply system right away wouldn't it? If large changes in price lead to smaller changes in demand, then don't smaller changes in demand lead to larger changes in price??
Would be interesting to see what would happen if something like that ever took place...
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