Friday, November 09, 2007

Gasoline Pricing

A Brilliant at Breakfast post today mentioned that gasoline prices aren't yet over $3.00 most places. The operative phrase is "most places," as here in fun-packed downtown metropolitan San Diego they are running in the vicinity of $3.30 for regular.

Our local news had an item on gas prices a day or so ago and said that
"it could be a lot worse." I don't remember all of the details, but in summer when gas was at a similar price, oil costs were much lower. If the oil companies were taking as much profit now as they were then, the price of regular gas would be over $4.00 per gallon. Back then the refiners were keeping more than $1.00 per gallon profit, now they are only keeping $0.38 per gallon. The difference is that demand for gas is lower in winter.

So they dropped their profit margin from 30% of sales to only 11.5% of sales. The grocery industry, for comparison, typically operates on a margin of 1%-2% of sales.

But oil companies were not gouging during the summer.

Speaking of summer. If the weather is going to be this gray, dreary, ugly, and cold for day after day after day, it could at least freaking rain.

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