Posted on 04/26/2006 6:35:00 PM PDT by Blood of Tyrants
The oil that is selling on the market is on oil FUTURES
Your response does not address his point which is that the value of an asset is determine by what someone will pay for it.
Finally, it is pathetic when I place more faith in Schumer's words than GW's,
Yep, it IS pathetic.
Not that I agree with you or anything. ;?)
As do I...And they were storing gas anyplace they could stick it...There was no shortage...
Then these items (refining costs? And marketing/distribution? Taxes?) should be deducted before profit is reported.
What you are not thinking of is....how is the dealer going to be able to afford the next tanker load if prices to him have increased substantially?
I own a gas station and a little over a year ago I paid about $15,000.00 every night for a tanker load of gasoline. Now my load (9000 gallons) costs close to $27,000.00 every night. In a fast moving market how in the world is a dealer who only get one or two loads of gas a week going to be able to buy the next one....if he is not charging the going rate?
The dealer is making about eight to ten cents a gallon (gross). On Monday he gets a load but then he gets another load on Saturday which costs him 30 cents a gallon more. A load is 9000 gallons x .30 cents = $2700.00. If he sold every drop of that previous load before Saturday at the original price he made $900.00 profit....on "THAT" load. Now all of a sudden he has to pay an additional $2700.00 for the next load. Prescription for bankruptcy! If he does not increase his prices daily to account for the wholesale price increases along the the line....well, I'm sure you can now understand the problem.
A week ago my regular was selling at about $2.89 a gallon. Today it is $3.23 a gallon.Tomorrow it goes up another .02 cents. I pass on my increase penny for penny to the customer. I don't get a .05 cent increase and charge .07 to the customer. If I do not keep up with the daily pricing I'm in trouble. Usually this is not a major concern in a steady market.....but the dealer who only gets a load or two a week has to keep up on the daily pricing, otherwise he cannot afford his next load.
Don't know if this helps or not...but is the correct answer.
I see where you're going. My point in citing those issues was that gas prices are dependent upon more variables than just the price of crude.
Remember the good ol' days when the price of futures going up meant prices would be going up in the future and had little or no effect on the spot market?
Read post 85
I'd suggest since this is 'American' oil, and tons and tons of it is freely given to the oil companies, they have to keep it in the American market...That'd be different, wouldn't it...
Thanks. You got it. The value of something is what a willing buyer and seller agree on. The trading of commodities creates buyers willing to pay prices based on their assessment of present conditions (e.g., war) and of future developments (e.g., expected embargos).
Sometimes houses in your example are bid up way beyond a sustainable price level. There are folks in my area who have spent $700,000 for condos in a development that is now cutting the price to $625,000 or less. You could assert that the earlier folks got the better units, maybe. But the automatic value increase they were anticipating has evaporated for a while. There is a psychology also in commodity trading and oil will likely back off from its heights.
I have a few stocks I've purchased in my retirement account that have increased significantly in value. Some of those that have risen to new heights I have sold. I did not sell at my purchase price. Similarly I have gotten out of stocks that were dogs. Despite what I paid for them I sold for lower prices.
I don't know if that's true or not, but overall demand in this country is increasing unless you've seen a population decrease or fewer cars on the road.
There are record profits in every healthy industry every year.
freely given?
Just hops from the ground into their refineries huh?
The rest must be purchased...on the market.
Speaking for myself, if I owned oil purchased at $50/bbl, I wouldn't be willing to sell it for $50/bbl if the market price was $75/bbl.
And neither would you. Because, if you were in the oil business, your next move would have to be to replace that barrel of oil you just sold. And it would cost you $75.
That would be true whether your were trading in coal, wheat, jellybeans...or oil.
Ok, say you own a small store and sell widgets. You generally stock about 100 of them and sell them all each week. Your turnover is 100% each week, which means you have to buy 100 more for the next week. Got that?
Now, this week, you have 100 widgets on your shelf that cost you $1.00 each to buy, including shipping, etc. Since you are an astute business person, you keep a sharp eye on the costs of widgets, and you are in contact with your distributor all the time. Got that?
Now, this week you have just put your 100 widgets on the shelf, in anticipation of selling all 100 of them again, like last week. However, today you get a call from your distributor, who tells you that the price of widgets (your cost) is now 10% higher. In anticipation of having to buy more widgets next week at a 10% premium, if you're smart, you'll mark up your existing widgets so you'll make the same margin when you have to buy new stock next week.
Later that day, your distributor calls and says that new widgets will now cost you 15% more than before because of his costs going up-- for whatever reason. So if you are going to keep your margin and make any profit, you had better mark up your existing widget stocks in anticipation of having to purchase next weeks stock at a 15% premium over previous cost.
You get through the day without another phone call, but the next morning your distributor calls again and says that your normal widgets will now cost 20% more than before so you better plan on it for your next order. Back you go to your widget shelf and mark up your existing stock, which you purchased at the normal price prior to these price increases.
You don't have any more money invested in the current stock of widgets, but in order to buy next weeks shipment, you're going to have to pay 20% more than you did before. If you don't mark up the current stock, then you won't have enough money to buy new stock. Or a smaller profit margin, at least. See?
'Course, your distributor could call you and say that your cost is going to be 10% less than you have been paying, and that would make you very happy. And next week, your cost would be 10% less, so you could make additional profit. Except that the widget store across the street gets the same call from their distributor, and in order to compete with you, they lower their price, because now it will cost them less. So you will be under pressure to lower your prices to compete.
It works the same way, up and down, and with a fast moving commodity and fast moving prices breaking several times daily, you will be spending a lot of time on the phone with your distributor and marking up/down your widget prices or you won't be in business long- for one reason or another.
I hope this illustrates how quick moving prices requires resellers to change prices. Back in the late '80's when the price of computer RAM was fluctuating by the minute and supply was very short, we would be getting price changes several times a day. If we didn't reprice what we had in stock in anticipation of what it would cost us to replace our stock, we would have lost money big time... which is what we mostly did, no matter how hard we tried. The guys making the money were the ones who had the contacts and who bought RAM by the carload, and then sold it to everyone else. Like they say, it takes money to make money. Also, good timing, excellent communications, a lot of luck and perfect planning.
Wrong, corporations never pay taxes, they never have and they never will, they collect taxes, tax is just another part of the cost of the item they sell. The consumer pays taxes.
Do you REALLY believe they are making only 10% profit when their total cost is probably only about a buck? Remember, when gas was so cheap back in '99? They were STILL making a profit when gas was sellinbg for 80 cents a gallon and taxes were half of that!
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You know, I lived in the Oil patch in '99 and LOTS of my neighbors were laid off from Exxon and Shell and Texaco. I lost 15 thousand on my house because I had to sell at the same time they did. The oil companies were hurting then, they weren't making the big profits you suggest, or else they wouldn't have been laying all those people off.
You need to do more homework. Commodities go through cycles. Oil companies have lean years and it is really shortsighted to go ballistic when there is a supply pinch and also international risk from Iran.
Lets focus on how our government can increase supply, like allowing drilling domestically. And how they can increase alternatives like nuclear.
To drill for oil and get half of what the going rate is would get you thrown off the company's BOD, or sued for fiduciary incompetence. The BOD of an oil company must try to make as much as they can for the company or resign. Conscience has nothing to do with capitalism. If XOM said they were going to cut their profits on purpose, there would be a stockholder revolt.
The only place gouging is possible, IMHO, is at the retail pump. The retail owner could decide to mark up 10 cents a gallon or $2.00 a gallon. All the rest of the system is a bidding situation. The refiner could mark it up if their weren't other refiners that would under cut him. It is bid on the Merc exchange also. I can buy unleaded gas for the same price the local station does if I want delivery.
Another myth is there is only 5 major oil companies. There are literally thousands. If XOM wanted to control the price, Murphy, Anadarko, Apache, etc, would have something to say about it, not to mention the foreign companies. The ignorance on this subject is embarrassing for a capitalist country.
self sufficiency has nothing to do with prices.
Canada is self sufficient yet after hurrican katrina and rita, gas prices approached $5 per gallon there.
agreed
Could it be because that unlike gasoline, none of us has to buy water if we chose not to???
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