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Which one cost you more? My point is that to the individual consumables like gas at 8% are much more costly than durables at 30%. Is it becoming more clear yet?



Gasoline at 8% is more costly to you than MS at 30%. But there's a lot of small business owners in this country that will spend far more on profits to MS over a lifetime than they will to Big Oil.

And that's probably not true either, you only think that you pay more for consumables at 8% because you fail to really look at how much profit you spend out in a month. What you spend on profits on durables in a given month (if you were to spread the profit out over the lifetime of the good) likely far outshadows what you pay in profits on consumables.

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Whats good for business is not always good for the economy and visa versa. I don't need to tell you how many products are affected by fuel costs and how all oil related cost are passed on down the line. Increased consumer product cost leads to reduced consumption...blah, blah, blah, it's the 70's all over again. Big business didn't see it coming then(till it was to late) and I'm not sure they see it now.



You'd have a point if the margins were significant enough to impact the economy. Simple fact of the matter is that if all the profit was taken out of gas it would still be expensive; few people would even notice the impact on their pocketbook. By your own math, even at exhorbitant pumping (20 gallons ever 3 days) you only paid $597 over three years. Average consumption is probably half that at best, so the average person is only paying about $100/year, less than $10/month, in direct profits to Big Oil. Ooohhh. Look out economy!

Figure everything else I spend in a month, and figuring the average margin of S&P companies is 9% (IIRC), I will pay out more than $300 in pure profit to numerous companies in a given month. That's not even counting whatever percentage of the interest all my lenders get to pocket in profit. So, figure that financial instituions make an average of 35% margins, and spending almost $2,000/month in interest payments; I'm spending a good $1,000 just in direct profit to various companies every single month. More than $12,000 per year. And Big Oil will get roughly $100 of that. Ohhh. We better knock that one out of there huh?! Let's go after one of the smallest contributors to my payouts in a year.

The fact my mortgage lender will make about $3,000 in profit on my house payments this year alone is okay, but that Exxon will make $200 on me this year is not? Or Food. Also a consumable. I'll probably spend more than $500/year in profit to various companies for food -- five times the profit that I'll pay to various companies for fuel. Oh, but let's go after the oil companies.

So gas profits amount to less than 1% of the total profits I pay out in a given month. But these are the ones that you're worried about? Even for a person not spending as much as I do, gas profits are still going to total an average of just $10/month. An amount, at best, of maybe 5% of the total profits that they paid out that month, and not a fraction of the total profits that they paid for food that month.

An added 24 cents onto a gallon of gas isn't going to make or break the economy, not even close, but it will make or break an oil company.

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So maybe a reduction in margin is not such a bad thing. Good for the economy over all and even with Wall streets twitchiness with margins cash in the bank will make them smile.



Cash in the bank will make them smile?

You really are new to this aren't you?

If you made $400 Billion Dollars in revenue and told Wall Street you were only going to make $4B in profits at best (1% margins so you save a whopping 21 cents/gallon) forever because "it's the right thing to do", your stock would probably be worthless within a week.

That $4B in "cash in the bank" means nothing. No one wants to own stock in a company with 1% margins and no hope of doing far better. The company would make more money selling their assets and putting the cash into T-Bonds than they would staying in business. And forget investing in your company. Return on capital invested would be a negative value. There's not even a decent return on their investments now with 8%. Why spend $100B on a refinery that will take a century to break even when you can put that $100B into any other investment outside of your company making 1% and make exponentially more money than you would ever make off another refinery?

So no incentive at all the grow your company. No incentive to cut costs either. Why try to save money if you don't get to reap the rewards? Since you're always going to make just 1% costs get out of hand. Who cares? You're gonna make your 1% either way it goes. So, the cost of your product actually goes up because you have no incentive to keep the costs low. That's what happens, without fail, when comapnies/industries become regulated -- growth stagnates and prices increase.

There's a company I want to own stock in. A company with piddly margins and no hope for growth.

And all to save just 21 cents a gallon -- less than the average price has gone up in the past 3 weeks alone. Neither you nor the economy would even notice the difference. But it would bring a trillion-dollar industry to its' knees.

For a good case in point, take a look at Ford. The market cap on Ford is less than it has in cash. That means that the market says that Ford is worth less the the cash it has in the bank. A "Ford Dollar" is apparently worth less than a "real dollar". That's what happens when you have "cash in the bank" but a company with very low margins and investors aren't foreseeing near-term growth in those margins.

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