[Az-Geocaching] Gas Prices

Thu Mar 10 14:45:43 MST 2005

WOW, $1.30 a share in earnings.   Since Exxon Mobil is currently trading a
bit over $60 per share, that means their profit for the quarter was an
unbelievable 2% on their investor's dollars, or 8% a year.  I can average
considerably better than that in many conservative mutual funds.  Do you
really think that 8% per year is unreasonably high?

Sorry, but I'm a capitalist, not a socialist or communist.  I think there is
nothing wrong with a company making a profit, and 8% is not excessive.  I
don't think 10% or 15% is excessive, either.  Companies are supposed to make
a profit.  If they don't, then people are out of work and investors are out
their money.

You are right, though, it is not a coincidence that earnings are up when
crude prices go up.  Markup is a percentage, not a flat rate, so if cost
goes up, selling price goes up to match, which means sales go up and
earnings go up.

If you think 8% is so wonderful, just buy a few shares of their stock.  Then
you can participate in the profits instead of whining about them.
Personally, I'm happy when other companies do well.  When they do, people's
portfolios (including mine) grow, and people have jobs.  That means they can
afford to spend more money at one of my businesses.  In my case, the
connection is pretty direct, since a major client of one of my businesses is
the local gasoline distributor, but everyone benefits when companies are
doing well.

Besides, just try to buy a gallon of anything else for what gas costs you.
Milk comes from a local dairy and requires very little processing compared
to gas, which is pumped up from a mile in the ground halfway around the
world, transported 10 or 12 thousand miles, and has to be expensively
processed before it is sold, but the milk still costs more.  Why isn't
anyone yelling about the dairy industry price gouging.  Heck, a gallon of
water costs quite a lot, and they don't do much of anything to that.

Bill in Willcox

  _____  

From: az-geocaching-bounces at listserv.azgeocaching.com
[mailto:az-geocaching-bounces at listserv.azgeocaching.com] On Behalf Of Brian
Casteel
Sent: Thursday, March 10, 2005 11:21 AM
To: listserv at azgeocaching.com
Subject: RE: [Az-Geocaching] Gas Prices

Economics lesson aside, the oil industry is so powerful that I don't believe
the same rules necessarily apply.  They control the economy in more ways
than I care to count.  Product can't move without oil, which is used in the
engines and is the base compound for the fuel that drives those engines,
among other things.

Exxon Mobil Corporation (NYSE:XOM) Monday reported fourth quarter results.
Net income of $8,420 million ($1.30 per share) was the highest quarter ever
for the Corporation. Net income increased $1,770 million from the fourth
quarter of 2003, which included a special item of $2,230 million relating to
the settlement of a long-running U.S. tax dispute. Excluding this special
item, fourth quarter earnings increased $4,000 million. 

Revenues and other income for the fourth quarter of 2004 totaled $83,357
million compared with $65,952 million in 2003. Capital and exploration
expenditures of $4,233 million in the fourth quarter of 2004 were down $127
million compared with last year.

Record earnings during a time of record crude oil prices are more than a
coincidence in my mind.  I can't wait to see what their Q1 2005 results are,
now that prices remained steadily above $50/barrel.

Brian

Team A.I.

  _____  

From: az-geocaching-bounces at listserv.azgeocaching.com
[mailto:az-geocaching-bounces at listserv.azgeocaching.com] On Behalf Of
SSpackeen at aol.com
Sent: Thursday, March 10, 2005 11:07 AM
To: listserv at azgeocaching.com
Subject: Re: [Az-Geocaching] Gas Prices

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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