[OT] Gas companies report record profits (old energy thread)

Dennis devel at muhlesteins.com
Mon Jan 30 11:30:51 MST 2006

> While your post has a lot of merit (even if it does simplify things
> quite a bit), I just had to point out a mistake here that is often
> made. With your hypothetical candybar retailing at $1.00 with a 10%
> profit margin, your profit per candy bar is 10 cents. For *profits* to
> increase by 50%, the profit per candy bar must be 15 cents. Assuming
> costs remained the same, that means the actual price of the candy bar
> only increased by 5 cents to $1.05. If the price were raised to $1.50
> without any corresponding rise in cost, the profit per bar would be 60
> cents, and 500% increase!
You assume that everyone else is taking a fixed cost out of the pie and 
the leftover goes to the gas company.  The original post said they get 
10%.  That means if gas is $1.50 they get $.15  (You know.. like tithing)

I don't personally know exactly where all the cost of the gas goes, but 
I would imagine that it is more like a pie.  e.g.  each entity gets a 
slice proportioned by the percentage they are entitled to of  the 
profit.  It's probably more complicated than that but I don't think the 
oil companies just get the leftover after everyone else takes a fixed 
amount out.  If that were the case, what happens when the prices is lowered?

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