"HeyBub" wrote in crayon...

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.

Conclusion: Congress is blowing smoke and is trying set the foundation
to nationalize oil companies like their neighbor Hugo Chavez.

-

Mitchell Holman thinks he is the greatest thing on
Usenet since Muhammed al Gore invented the Internet.
If Usenet revolves around Mitchie-Boy Holman why
won't he answer a simple question?

Who gives a rat's ass who Mitchell Holman is?