[Az-Geocaching] Gas Prices

[SSpackeen at aol.com]

Bill that's a great lesson on retail economics.
 
The problem is that, in anticipation of a price REDUCTION, the retailer  
should IMMEDIATELY drop retail prices to the consumer.  We all know that  won't 
happen when prices are falling, so naturally we're tired of providing the  cash 
flow during the upswing!
 
The blame for the price gouging doesn't land on the retailers anyway, but  on 
the producers.  That's where we need to put some regulatory price  controls 
in place to keep monopolistic pricing tactics from extracting  abnormally high 
profits during high travel season.
 
In a message dated 3/10/2005 8:41:46 A.M. US Mountain Standard Time,  
bill at freeholder.com writes:

Well,  let me just comment on a couple of aspects of retailing.  I have  been
in retail and associated fields for 35 years.

Let's say I have  a store that sells gizmos.  I currently have 25 gizmos in
stock, and I  paid $10 each for them.  Since I am a small retailer, I sell
them for  $19.95, which gives me 50% gross profit.  That is considered  pretty
standard for smaller or non-discount retailers.  The big  discount stores,
like Wal-Mart, work on more like 30% to 35% gross  profit.

Anyway, let's suppose that I get a new price list from my  supplier, and my
cost for gizmos has gone up to $15, because the dollar has  fallen against
the yen, and gizmos are made in Japan.

Now, if you  aren't knowledgeable about retailing, you may think that I will
need to  raise my price as soon as I run out of the gizmos I have in stock,
but  that's wrong.  I actually need to raise my price right  now.

Why?  The $20 I get for gizmos represents the 50% I paid for  them, and the
50% I need to run my business.  If I sell my current  inventory of 25 gizmos
for $20 each, I will realize $500 total.  $250  of that is needed to run the
store, leaving $250 to buy more  inventory.  The problem is that $250 will
only buy about 17 gizmos at  the new cost of $15 each, not the 25 I sold.  If
I continue working  like this, pretty soon I don't have enough inventory to
stay in  business.

So, any business has to sell their current inventory for a  price that is
based not on what the current inventory cost, but on what it  will cost to
replace it.

How does this affect gas?  If the  price of crude goes up, refineries have to
immediately raise the price of  their current inventory, which means
wholesalers and retailers have to do  the same thing, so the new price hits
the gas station on the corner pretty  quickly.  A gas station can't afford to
sell their current inventory  for less than it will cost to replace it, no
matter what it cost them to  begin with.

I would like to pay less for gas, too, but that doesn't  blind me to basic
business realities.  Besides, we have the cheapest  gas in the world.

Bill in Willcox

-----Original  Message-----
From: az-geocaching-bounces at listserv.azgeocaching.com  [mailto:az-geocaching-

It went from $1.99 to $2.08 for regular unleaded  overnight here.  If there
is still a myth that those living close to  refineries getting lower prices
on fuel, it's a bunch of crap.  We  have 3 refineries in town, and we're
paying as much right now, if not more  than places like Phoenix.  

I seem to remember in the past that  when crude prices hit new highs it took
'several weeks' to see the impact  on the refined fuel markets.  But I've
since learned that 'several  weeks' translates to approximately 3  days.



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