[Winona Online Democracy]
QUOTE (TMSCHMIDT): 2) remaining
competitive with the guy down the street,
Unfortunately, there is precious little competition left in the retail
gasoline market, not only in Winona, but throughout the portions of the
midwest I just drove through. Differences exist between states, and between
major cities vs more out of the way stations, yes, but actual competition?
Nah.
Terri Hyle
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From: <i>"Schmidt, Tania M"
<[EMAIL PROTECTED]></i><br>To: <i>"C. E. Woodford"
<[EMAIL PROTECTED]>, <[email protected]></i><br>Subject:
<i>RE: [Winona] Re: Winona Digest, Vol 20, Issue 22</i><br>Date: <i>Tue, 30
Aug 2005 13:39:38 -0500</i><br>>[Winona Online
Democracy]<br>><br>>Fuel pricing at the retail level is a very tricky
thing. Retailers must<br>>strive for that perfect balance between 1)
cash flow needs, 2) remaining<br>>competitive with the guy down the
street, 3) actually making a profit.<br>>In today's market, the average
retailer may only be making 8-12 cents<br>>per gallon. On a percentage
basis at today's average retail price of<br>>about $2.70, that's a gross
profit % of a whole 3-5%. If any other<br>>businessman were to price his
#1 selling item at that margin, they would<br>>go out of business - or
their accounting firm would tell them to wise up<br>>and start selling
the product they sell the most of for at least a<br>>20-25%
margin.<br>><br>>Yes, the price moves up sometimes at just the hint of
oil/fuel supply<br>>issues. That's because they need more cash to pay
for the more<br>>expensive fuel. True, it does not come down as fast as
others think it<br>>should.<br>>However, on the way up, retailers
frequently earn less because their<br>>cash flow doesn't always enable
them to keep their tanks full. On the<br>>way down, they try to make up
for some of that lost profit.<br>><br>>In the end, it is a game of
supply and demand. The price may be near $3<br>>per gallon, an increase
of about 100% over the past 2 years. But, has<br>>the demand decreased
by anywhere near that amount? Absolutely not -<br>>domestic demand for
oil and refined product continues to climb. Why<br>>should be price NOT
increase when demand continues to increase?<br>><br>> >From the
refiners' vantage point, they are FINALLY making the returns<br>>that
their billions upon billions of dollars in investment and
potential<br>>risks/liabilities dictate they should be getting. Much of
our pipeline<br>>system dates back to WWII. Many of our tank farms are
old. We haven't<br>>built a refinery since Mobil's Joliet Refinery
opened in the 70's. With<br>>some cash in the bank, oil-related
industries can actually start<br>>reinvesting and replacing these
antiquated facilities.<br>><br>>When the rest of the US consumer base
was making money hand-over-fist in<br>>the '90's stock market boom - just
by trading paper and not producing<br>>anything - the oil industry was
busy restructuring, cutting costs,<br>>becoming more efficient. Now
they're reaping some of those rewards -<br>>just like any other business
would expect to do.<br>><br>>The Oil Industry is always picked on when
prices are high. Did they<br>>receive any letters of 'Thank You' when
they were selling fuel at $0.99<br>>per gallon just a few years ago? If
you take a look at what gasoline<br>>should be costing, based on the rate
of inflation since about 1970, it<br>>should be nearer the $5.50 mark.
Everything else went up in price - as<br>>did sales volumes of all those
consumer goods. Why not fuel?<br>><br>>In today's regulatory
environment, refiners are producing no less than<br>>51 different types
of fuel around the country. It's not just 87, 89,<br>>and 91 Octane.
It's Summer Fuel with 15% Methanol, it's Winter Blend<br>>with only 5%,
it's Orange County with it's requirements or Cook County<br>>with it's
own.<br>>Local governments, over the past 10-15 years, have taken it
upon<br>>themselves to become experts in not only the business of cleaner
air,<br>>but portend to be able to tell refiners what to sell and how it
should<br>>be produced. Producing that many is one logistical challenge,
but<br>>shipping different fuels to different locations in the same
pipeline<br>>present a whole other challenge.<br>><br>>Tania
Schmidt<br>><br>>-----Original Message-----<br>>From:
[EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]
On<br>>Behalf Of C. E. Woodford<br>>Sent: Tuesday, August 30, 2005
12:23 PM<br>>To: [email protected]<br>>Subject: [Winona] Re: Winona
Digest, Vol 20, Issue 22<br>><br>>[Winona Online
Democracy]<br>><br>>_______________________________________________<br>>This
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