"SteveB" wrote in message
...

"NotMe" wrote in message
...
"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.

I really don't have any sympathy for Rip and Gyp stores, since they sell
almost every product on their shelves for twice normal retail.

You want it or don't you? That's their attitude.

higher overhead means a different (more expensive) pricing model. that's why
places like Costco and Safeway and Circuit city can sell things cheaper than
comperable mall stores





Steve