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

Nicholas Leippe nick at byu.edu
Mon Jan 30 11:39:26 MST 2006

On Monday 30 January 2006 11:30, Dennis wrote:
> 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?

There are both, fixed costs and costs base on a percentage (taxes).  
Regardless, if the price goes up (the pie is getting bigger), the piece left 
over for the gas company gets bigger.  Conversely when the price goes down, 
the piece gets smaller.  Of course, if the price goes too low, that piece can 
become a negative size/loss since the price doesn't cover the sum of all of 
the costs anymore.  But guess what--who pays the taxes?  The guy at the pump 
does.  Because the demand curve is nearly perfectly inelastic, the oil 
companies can just pass that cost right on down to the us at the pump.


Nicholas Leippe
Sales Team Automation, LLC
1335 West 1650 North, Suite C
Springville, UT  84663 +1 801.853.4090

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