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Media Hype isn't going to help fuel prices

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Old 02-24-2004, 12:53 PM
  #21
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Originally posted by Formula Outlaw
In any miniscule way that I can I am going to fight it. It's better than sitting around doing nothing and letting them bend us over the barrel.

Ohhh I know I'm gonna' get flamed for this but.... Best thing you can do to fight these prices is to keep your fingers off those ignition keys. Every time you drop $500.00 in your tanks you're hurting the cause.

If you want prices to come down you need to keep your eyes open to what the Enviro-Nazis are up to. Thanks to them we have little domestic oil and huge reliance on foreign imports.

Anyone remember MTBE? We're going to be paying for that debacle at the pumps for years.
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Old 02-24-2004, 01:16 PM
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just go long oil futures.
this will hedge your usage.
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Old 02-24-2004, 02:09 PM
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Originally posted by Formula Outlaw
You buy 10 apples at 50 cents each you have five dollars invested. You sell those ten apples at one dollar apiece you make 10 dollars, less the five dollar investment, you net profit five dollars.

If you sell those 10 apples at 75 cents apiece (half the original "mark-up), you net $ 7.50, minus your original investment of $ 5.00, you net profit $ 2.50, half your original net profit.
First off, you're not cutting your price in half, but your markup. The price is $1.00 each apple, and your markup is $.50. Cut your price in half, as you advocated in your original post, and you're selling them for what you bought them for.

But, let's go ahead and look at using a 50% reduction of markup: In that case, your example is right, as far as it goes, and if your markup is 100%.

But, what if you have to pay rent on your apple stand, or include the cost to drive to the apple wholesaler who sold you the 10 apples, or pay an employee who helps you with the apple business, or pay an accountant to prepare your tax return? These expenses don't fluctuate based on how much markup you add to your purchase price.

What you are looking at is "Gross Profit", not "net profit".
Sales
-purchases or cost-of-goods-sold
=Gross profit
-general, sales, and administrative expenses
=earnings before interest, taxes, depreciation, and amortization
-interest on loans, taxes, depreciation, and amortization
=Net Earnings or Net Profit.

Back to your example, if all apple-selling and apple-business management expenses = $3.00, than your net profit before taxes is $2.00
$10 sales
-$5 cost of merchandise
=$5 gross profit
-$3 SG&A expenses
=$2 ebitda (or net profit in this real simplified example)

Now, reduce your markup by half, or $2.50, and you don't have enough "gross profit" to cover your SG&A expenses.
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Old 02-24-2004, 02:17 PM
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Here's the way i look at it: I like driving my truck and going out on the boat so i'm not going to sacrifice the things i like to do just to try to prove a point to the oil companies because it won't work!! So go out and fill up.
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Old 02-24-2004, 02:27 PM
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ofshore, I'm with you on that one.

Chart, good point! Most people neglect to factor in things like G&A, Overhead, Cost-of-Monies and so forth. These things are invisible to the consumer. All they tend to see is Selling Price less Cost = Profit. Organization costs are huge. I also don't have ANY problem with any company making money. After all, isn't that what they're in business for?

I'm as unhappy about the cost of fuel as anyone but blaming the refiners for turning a profit doesn't help.
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Old 02-24-2004, 02:39 PM
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Quote:
Originally posted by Chart
First off, you're not cutting your price in half, but your markup. The price is $1.00 each apple, and your markup is $.50. Cut your price in half, as you advocated in your original post, and you're selling them for what you bought them for.

But, let's go ahead and look at using a 50% reduction of markup: In that case, your example is right, as far as it goes, and if your markup is 100%.

But, what if you have to pay rent on your apple stand, or include the cost to drive to the apple wholesaler who sold you the 10 apples, or pay an employee who helps you with the apple business, or pay an accountant to prepare your tax return? These expenses don't fluctuate based on how much markup you add to your purchase price.

What you are looking at is "Gross Profit", not "net profit".
Sales
-purchases or cost-of-goods-sold
=Gross profit
-general, sales, and administrative expenses
=earnings before interest, taxes, depreciation, and amortization
-interest on loans, taxes, depreciation, and amortization
=Net Earnings or Net Profit.

Back to your example, if all apple-selling and apple-business management expenses = $3.00, than your net profit before taxes is $2.00
$10 sales
-$5 cost of merchandise
=$5 gross profit
-$3 SG&A expenses
=$2 ebitda (or net profit in this real simplified example)

Now, reduce your markup by half, or $2.50, and you don't have enough "gross profit" to cover your SG&A expenses.

I was just trying to keep this reasonably simple, not write a thesis for a degree is business accounting.

And you are correct that in my original post the "wordage" was wrong so I went back and edited it to state correctly the point I was trying to make.

Anyone can assign any dollar amount figure in any manner they choose to any subject for the purpose of making a specific issue appear in the manner of their choosing.

And as I have worked for myself the better part of 30 years I have learned that after all expenses are paid, what you have left is referred to as net profit. Net is net, in any language, or business.

The only point I was attempting to make is that the oil companies are gouging the hell out of us, not get into a debate over economics 101.
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Old 02-24-2004, 02:45 PM
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Quote:
Originally posted by Lofty
I also don't have ANY problem with any company making money. After all, isn't that what they're in business for?

I'm as unhappy about the cost of fuel as anyone but blaming the refiners for turning a profit doesn't help.

I certainly don't have a problem with a company turning a profit, that's what I'm in business for. I just think that 3 billion dollars, net profit, for one quarter of the business year, is just a bit excessive given the fact that fuel prices have such a direct impact on our economy overall.
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Old 02-24-2004, 03:07 PM
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Who's to say what is excessive profit. Don't get me wrong here, I'm not looking for a fight. Who get's a share of that 3 billion? It doesn't go up in smoke. I own stock in a number of refiners, oil companies, exploration companies and consulting firms, it's been extremely profitable for me.

The gas prices are TOTALLY out of line but I still don't blame the refiners. I do think that paying $.75/gal in tax IS excessive however.

The refiners should make as much money as they can get away with. Crude should be down at $5/barrel not $30. Now that would bring the price at the pumps down, refiners could make their 3 billion, then you, I and everyone else could be happy. Well except for the Enviro-Nazi's but who cares about them....
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Old 02-24-2004, 04:06 PM
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Quote:
Originally posted by Formula Outlaw
I was just trying to keep this reasonably simple, not write a thesis for a degree is business accounting.
Oh, what I wrote was actually quite simple, and far, far from a thesis in accounting. But it did attempt to bring real-world accuracy to your generic example.
Quote:
Originally posted by Formula Outlaw
Anyone can assign any dollar amount figure in any manner they choose to any subject for the purpose of making a specific issue appear in the manner of their choosing.
I hope you are not referring to me or my post here. I don't have an agenda on this topic, and only posted because I could not let such a mis-use of basic accounting and business practices go unchallenged.
Quote:
Originally posted by Formula Outlaw
And as I have worked for myself the better part of 30 years I have learned that after all expenses are paid, what you have left is referred to as net profit. Net is net, in any language, or business.
That's quite an accomplishment, as most new ventures and self-employment fail within a few years. And I agree that what's left after ALL expenses are paid is Net. I apologize if you thought I suggested anything else.
Quote:
Originally posted by Formula Outlaw
The only point I was attempting to make is that the oil companies are gouging the hell out of us, not get into a debate over economics 101.
It does seem there is gouging happening, but I suspect OPEC is mostly at fault. Not that the oil companies are angels. It ticks me off that gas jumps $.20 on Thursdays in Indy, and comes back down on Tuesdays, like clockwork. But that is a local issue, not national.

Another blame for high prices would be governmental regs that make building new domestic refineries "impossible". As one of the aging refineries always seems to crash prior to the summer driving season. (see my angel comment above). But that is a regional issue, not national.

Personally, I'm interested in what happens to OPEC countries when alternative fuel sources make crude oil obsolete. Maybe they will then get together and price fix sand!
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Old 02-24-2004, 04:49 PM
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Since OPEC countries can't grow their own food, maybe we should charge them 30 dollars for a bushel of corn.
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