"HeyBub" wrote in message
m...
| SteveB wrote:
|
| The local Rip and Gyp has always fascinated me. On Monday, they have
| 10,000 gallons of gas delivered. On Tuesday, there's a war in Outer
| Karsfarkistan, and the price goes up 25 cents a gallon, even though
| the ten thousand gallons in the ground were bought at the pre
| Karsfarkistan War price. But, nonetheless, the price immediately
| goes up a quarter. Now, peace is declared in Outer Karsfarkistan,
| and it still takes three months for the price to ratchet down. A
| little.
| Fascinating. And yet, some clueless morons whine about oil companies
| gouging. They have nothing to do with what the local Rip and Gyp
| charges no matter how cheap they bought the gas.
|
|
| In Economics, this is called "Rocket Up, Feather Down." It is the way
| pricing works for commodities.
|
| First, whether the 10,000 gallons is in your tank, the gas station's tank,
| or still in the ground in Ickystan, it has a value determined by the
market.
|
| Take a simple example: Gas station buys two gallons of gas at $3 each
| expecting to sell them for $3.25 (twenty-three cents for other expenses
and
| two cents profit). That is, he needs an additional fifty cents on the sale
| for his business to survive. If his prices don't change, he needs to take
in
| $6.50. He sells one gallon of gas the first day at $3.25.
|
| The next day, his replacement cost goes to $3.25 before he can sell one of
| his gallons. He needs $6.50 ultimately to replenish his stocks and 50
cents
| gross profit, but has on hand $3.25 and one gallon of gas. He's got to
sell
| that remaining one gallon at $3.75 to break even!
|
| Point is, it's not only the markup that has to be considered - it's the
| replacement cost of the raw materials.

I'm reminded of the fuel shortages of the '70s. No fuel at $n but the next
day lots of fuel at $n+x. (even with price controls)

And don't kid yourself there was LOTS of fuel in the '70s to the point were
there was no place else to store it.