Political Crossfire Forums

[JLB]

[quote="Alizard"] JLB wrote:

You can't improve on perfection. 8:)

So, have prices dropped this year, or not?

Quote: Do you mean gasoline? Yes, there was some reduction from the astronomical levels that Big Oil pumped them up to, but they are still too high. And the reduction was for the election, and it remains to be seen how fast they will ramp them back up.

Did crude prices fall at the same time?

How deep does the conspiracy go?

Is Hugo and OPEC involved in helping Bush? 8:)


Quote: They don't hold elections every year, you know.

Yes, I took civics back when they used to teach it. 8:)



Quote: Or will you be making some more predictions for the prices?

Yes, they will drop further, until OPEC cuts production, or a world event affects them.

Quote: We always look forward to your predictions.

Your daily reality check will always be here. 8:)

[[Bible]Monkey]

Quote: Oil tumbles to lowest level since June 2005

That's not good. Not horrible, but not great. Hopefully it'll climb back above $70 by the summer of '07. At least natural gas is above $7 a gigajoule.

[[Bible]Monkey]

GTTofAK wrote: I run a business.

At the time I bought my inventory the cost of materials per unit was $20.

At the time that a unit is produced the cost to replace the lost inventory so I can continue to produce more units is now $30 dollars.

If I sell my product for $25 dollars making a 25% profit I will be $5 short of having enough cash on hand to by the materials necessary to produce another unit and I will be out of business.

You're not leasing an oilfield on a fixed twenty year lease for 50¢ an acre and paying a fixed 12% royalty to the state for your raw product.

If you were , [like BP and Exxon are ] the raw product price [your upstream costs ] remains substantially unchanged -the bulk of your raw product -that portion pumped from oil-bearing strata by your upstream division,that portion not purchased -is unaffected, by an arbritrary cost-per-barrel that only affects external oil purchasers.

i.e If you're making Birdhouses, selling them for ten bucks a pop, and have a fixed cost twenty year lease on the forest, and the terms of the lease allow you to cut down as many trees as you like, you don't give a rats ass what the price of ( raw) timber is. If timber costs double, now you can charge twenty bucks a birdhouse and put the money in your pocket, or go lease more forests.

The birdhouse maker beside you who doesn't have a lease on the forest, and has to buy the timber, then yeah-your analogy applies to him.

[GTTofAK]

[Bible]Monkey wrote: GTTofAK wrote: I run a business.

At the time I bought my inventory the cost of materials per unit was $20.

At the time that a unit is produced the cost to replace the lost inventory so I can continue to produce more units is now $30 dollars.

If I sell my product for $25 dollars making a 25% profit I will be $5 short of having enough cash on hand to by the materials necessary to produce another unit and I will be out of business.

You're not leasing an oilfield on a fixed twenty year lease for 50¢ an acre and paying a fixed 12% royalty to the state for your raw product.

If you were , [like BP and Exxon are ] the raw product price [your upstream costs ] remains substantially unchanged -the bulk of your raw product -that portion pumped from oil-bearing strata by your upstream division,that portion not purchased -is unaffected, by an arbritrary cost-per-barrel that only affects external oil purchasers.

i.e If you're making Birdhouses, selling them for ten bucks a pop, and have a fixed cost twenty year lease on the forest, and the terms of the lease allow you to cut down as many trees as you like, you don't give a rats ass what the price of ( raw) timber is. If timber costs double, now you can charge twenty bucks a birdhouse and put the money in your pocket, or go lease more forests.

The birdhouse maker beside you who doesn't have a lease on the forest, and has to buy the timber, then yeah-your analogy applies to him.

You are forgetting one important thing its called the NYMEX. BP refining pays BP drilling the NYMEX price fore a barrel of oil.

And why would I bother making my own bird house when I can sell my timber to the other guy for more.

[GTTofAK]

Alizard wrote: GTTofAK wrote:
To put it as simply as possible. When the price of raw materials is rising the retail price rises just as fast because of the need to replace inventory. When the price of raw materials is dropping the retail price drops far slower because of the need to make a profit.

Look. I don't mean to sound as condescending as your posts, but I am in business and probably have taken more courses in business economics than most people.

You are, quite simply, blowing smoke.

"Profit" is not an instantaneous event, it is an ongoing process of sales and expenditures.

Your claim that if material costs go up it INSTANTLY requires raising prices is specious. It doesn't, and if they do their profits will jump while they "pump out" WIP (which if you are a business expert, know means Work In process), since all that product was produced using lower-cost raw material.

This is particularly wrong:


Quote: When the price of raw materials is dropping the retail price drops far slower because of the need to make a profit.

No, No, NO! "Profit" is not declared at the end of the day, it's the end of the quarter.... or year, or whatever. There is no fixed time limit. And if prices are dropping for material, most businesses are forced to drop product prices NOW to hold market share. WHY? Well: if production and material costs are down (and we don't lower prices) somebdoy else will set up shop and produce the product for the CURRENT GOING rate to make $XX profit (which will be a lower price than ours) and steal all our market share. And when you are not selling your product, your profit is ZERO!

The notion that businesses are forced to "hold a price" to make a specific profit margin on WIP while it pumps out is just WRONG.

I am trying to be more polite, so I will simply close by saying you are wrong. There is no inherent assymetry in business forcing rising costs to be reflected at the retail level faster than lowered costs must be.

BTW: what you are saying also defies common sense, and that is always a signal to re-think your data.

Alizard, I'm at a loss. In a desperate attempt to save some face are you arguing that the quick rise and low fall in prices doesn't occur for lack of any other thing to argue. Have you in desperation resorted to arguing against the obvious.

[[Bible]Monkey]

GTTofAK wrote: [Bible]Monkey wrote: GTTofAK wrote: I run a business.

At the time I bought my inventory the cost of materials per unit was $20.

At the time that a unit is produced the cost to replace the lost inventory so I can continue to produce more units is now $30 dollars.

If I sell my product for $25 dollars making a 25% profit I will be $5 short of having enough cash on hand to by the materials necessary to produce another unit and I will be out of business.

You're not leasing an oilfield on a fixed twenty year lease for 50¢ an acre and paying a fixed 12% royalty to the state for your raw product.

If you were , [like BP and Exxon are ] the raw product price [your upstream costs ] remains substantially unchanged -the bulk of your raw product -that portion pumped from oil-bearing strata by your upstream division,that portion not purchased -is unaffected, by an arbritrary cost-per-barrel that only affects external oil purchasers.

i.e If you're making Birdhouses, selling them for ten bucks a pop, and have a fixed cost twenty year lease on the forest, and the terms of the lease allow you to cut down as many trees as you like, you don't give a rats ass what the price of ( raw) timber is. If timber costs double, now you can charge twenty bucks a birdhouse and put the money in your pocket, or go lease more forests.

The birdhouse maker beside you who doesn't have a lease on the forest, and has to buy the timber, then yeah-your analogy applies to him.

You are forgetting one important thing its called the NYMEX. BP refining pays BP drilling the NYMEX price fore a barrel of oil.

I didn't forget it , I referenced it by analogy in the last sentence of my post, although I appreciate your kind attitude in bringing all facts to bear unemotionally.

The left pocket is paying the right pocket-when BP downstream division ( from the refinery to the gas station) pays BP upstream( from the oilwell to the refinery) .

When the oil price moves one way, one division takes a profit, the other takes a tax deduction on a carry forward from it's last years profits. When the oil price moves the other direction, the other ( upstream or downstream-as the case may be) division claims the tax deduction-and there are many for Oil companies-more than any other industry -the tax deduction is claimed by the one , and the profit by the other division.

That is why the few remaining Giants of the U.S oil industry- subsequent the 90's mergers- can only have three kinds of years: Profit, enormous profit, or tax deduction.

Before this discussion can get off the ground, though, we need to look at how many oil companies there were five years ago, ten, and twenty years ago-when there still remained a semblance of competition.

They've merged. We need to look at which laws were changed to allow them to merge in the manner they did. And subdivided the resultant brobdingnagian into convenient 'themselves' in manners which used to be disallowed, as it was against the interest of the American people .

And we need tto look at the regulatory framework which used to prevent the current shell game, and what brought about the removal of such consumer protections.


Quote: And why would I bother making my own bird house when I can sell my timber to the other guy for more.

If you sell your timber to the other guy ( an oil company decreasing it's stated reserves) your stock drops.

Look at what happened to Shell Oil, in 2004, when the Security and Exchange Commision caught them inflating their declared stated reserves ( the gold backing the stock price, if you will) by 20%.

[JLB]

It would seem to me at my initial reading of yor statement that the tax deduction would have to be equal to the average percentage profit of BP in order to be a valid statement.