Bend Over!

At Least Kiss Us First
By Joseph Walther


There’s a big difference between “spinning” a point of view and lying. Politicians, public administrators, newspaper publishers and editors, marketers, and lawyers understand this. These same folks also know that there is nothing more reliable than the gullibility of many Americans. This became ever more evident this past week as various “experts” barfed out all sorts of misinformation over the spike in gasoline prices.

Of course, the recent meteoric increase in the price of gasoline is not the only thing in the news lately. As I read my copy of the News Journal, the liberals’ how-to manual, I noticed a number of “spins” that struck me as being interesting. I’m going to start pointing them out in future issues, too.

For the present, though, I’m going to concentrate on gas prices and my theory on who is doing whom, and without so much as a kiss or decent lubricant.

Up front, let me tell all of you that we could fight back with a decent mass-transit system. We could compare Delaware’s mass-transit system to the one they have in New York City. There’s only one problem with this and it’s the fact that Delaware does not have a mass-transit system. I’d sell my car in a heartbeat if I had access to a reliable public transportation system that ran on a schedule that’s reasonably close to convenient.

Anyway, I heard an individual, on a local talk radio show, explaining the current high price of gasoline. He explained that oil companies sell petroleum based on a fixed markup and the fact that the futures market determines the price of a barrel of oil. In other words, people who buy oil futures are betting on the future. The situation in the Middle East is volatile and so the price of oil is sky high.

I know about the futures market, I know how it works. I also know that oil companies use a fixed markup. Up to this point, the man was accurate. For example, let’s assume that YOU are Exxon/Mobil and YOUR fixed markup is 50%. When you buy a barrel of oil for $75, you’ll sell it to a refinery for $112.50. Your friend is the refinery and he tacks on his markup of 50% and sells the barrel to the local retail gas sellers for about $3.85 a gallon. Whenever the barrel price increases, the price at all of these levels goes up because the markup is fixed. This is not rocket science.

The problem is that you and I do not buy our gas from oil companies or refineries. We buy it from the local Wawa, Exxon, BP, or any one of the other locally owned businesses that sell gasoline. These folks must operate under a different set of rules. Here’s what I mean.

A small, local business must base its business plan on a minimal markup in order to stay in business. The markup has to be reasonable enough to provide a product-selling price that falls within the “going” price range. For example, if you’re selling pizza and the price range for pizza runs between $9 and $10.50 per pie, you have to sell your product within this range. If your costs require you to sell higher than the high end of the range, you will not be in business for very long.

On the other hand, if your costs are such that you can sell your product below the lower end of the range, and you do, you’re an idiot! People within your sales area have shown a willingness to pay between $9 and $10.50, so aim for the mid-point of that range. As long as your product is good and comparable to the others in the area, you’ll be able to compete, actually undercut some of your competition, and still make a good living. Neither is this rocket science.

The point here is that the local retailers, where you and I buy our stuff, including gas for our cars, have no control over selling price. If the “going” price range provides sufficient income, they stay in business. Otherwise, they hold bankruptcy liquidation sale.

Smart small business owners keep their operating costs low enough so that they make a decent profit selling at or very close to the mid-point of the price range. But, there is no law stating that they have to sell at that point if the “going” price range shifts to higher ground.

Last week, I topped off my gas tank. It required ten gallons of standard grade gas at a price of $2.899 per gallon. I paid a total of $28.99 for the fill-up. I proceeded to go onto the Internet to see where my gas dollar goes. You can, too, by clicking here. I then went here to find the per gallon tax bite (all taxes both federal and state).

I’ve summarized my findings in the table below. But, you can try your own according to the tables provided in the links above.

Anatomy of a Screwing

Item Breakdown Dollar Breakdown
Crude Oil($.49/$) times $28.99 I spent. $14.205
Taxes($.414/Gal) times 10 gallons bought $4.140
Refining($.13/$) times $28.99 I spent $3.769
Retailing($.10/$) times $28.99 I spent $2.899
Theoretical Total $25.013
My Actual Total $28.990
Absolute Difference $3.977

My question to the talk show pontificators is this. Who gets the above difference between what I actually paid and what I should have paid. The “Where does your gas dollar go” chart came from the National Association of Convenience Stores.

I’ve shown this breakdown to several local retailers. It has them all flustered, particularly the ones who have told me that they send out scouts each day to see how much the local price range has changed. If it has shifted up, they raise their own prices, whether they actually need to or not.

There’s no law against this. They can screw us all they want as long as we allow it. We have to allow it because our cars won’t run on water. I don’t know about you, but the least the bastards could do is kiss us first!

Have a great week.

Joseph Walther is a freelance writer and publisher of The True Facts. Send your comments. Just click here.