Gas, and many other products for that matter, are priced by a percentage
markup over cost method. If your material costs increase you still get
the same percentage back but the absolute profit is higher. Simple
math. I for one see no great conspiracy there. The government does
the same thing with taxes.
Tom C wrote:
I just listened to an NPR program broadcast yesterday. Overall I
thought the industry analyst answered many questions vaguely with a
little spin.
He did say (big surprise coming) "Gas companies are not philanthropic
organizations".
The single one item that bothers me is that oil companies are making
record profits. I don't know quite how this works, but in my simple
mind the oil companies producing the crude oil and the major gasoline
refiners buying the crude oil are one and the same, or at least they
seemed to be named very similarly.
The report stated that oil companies are bringing crude oil to market
at a cost of $7 - $8 per barrel. Yet it's selling at 10X that
amount. An open market is one thing, but who is bidding on and buying
that crude oil for $75/barrel? Isn't it the gasoline refiners (read
oil companies)? *If* they all bid the price up to buy their own oil
at high prices, then worldwide all buyers (non-oil producers) are
forced to buy at high price, wouldn't this be the case?
So it seems to me at least, that oil companies themselves may be
creating the artifically high selling prices for crude oil in the same
way shill bidding raises the price in an e-bay auction. If they pay a
high price for their own crude oil, it's like taking money from the
left pocket and putting it in the right. Then the wholesale price of
gasoline can be 'legitimately' raised by the refiners (oil companies)
because it cost them more for the oil.
In addition it was stated that several years ago the markup on
refining was $.15/$.20 a gallon and now it's $.50/$.60 a gallon.
Maybe I've got it wrong... but the statements that the oil companies
are merely responding to the market is a shallow sham and rings hollow.
Tom C.
--
When you're worried or in doubt,
Run in circles, (scream and shout).
