Local Newspaper Threatens Logic

On Friday October 31st, my local newspaper assaulted the intelligence of the residents of southern Utah, by running three articles on the first page of section C, the Money section. Article one: "Decline worsens. Reports on GDP telling of grim conditions in the U.S." right along side we have article two: "Bill collecectors get tough, complaints surge", then to finish off with a flourish, article three: "ExxonMobile tops record in U.S. for 3rd quarter"

The grouping of these three articles together makes the implication that while we, the common family, are roughing it through tough economic times, the oil companies are living it up. They are raking in billions of dollars, 15 billion in just the 3rd quarter alone, while we are left to make the choice of eating steak for dinner, or buying another tank of gas to get to work tomorrow. Frankly, I'm sick of hearing about how much the oil companies are making. They make a product that we need. One that, right now, we CANNOT live without.

When politicians and activists make the case against the oil companies, they talk about the billions of dollars they make in profits, but you'll never hear them talk about their profit margin. A profit margin is basically the percentage that a product is marked up for the manufacturer or retailer to make a profit. At a basic level, if a product costs $10, you can bet that the retailer bought it for somewhere close to $6 from the manufacturer whose cost to make that item, probably ran somewhere in the neighborhood of $4. Blah blah blah right??? Well the reason this matters is that the retailer made a hefty 40% profit off of that item. The manufacturer, made close to this same percentage. But no one barks because it's not billions of dollars.

The oil companies margins are right about 7%. Exceptionally modest given that most margins on the items you buy are much much higher. But since the oil companies are doing such an incredible volume of business, they make a much higher dollar amount. Are they gouging us? NO. If they were you would see profit margins much closer to the profit margins on name brand clothes. and gas prices nearing $8 per gallon.

The bottom line is, if you make $1 off of every unit you sell and you sell 1,000 units, you are going to make $1,000. But if you make $100 off of every unit you sell, you only have to sell 10 in order to make the same amount of profit. So who is doing the price gouging? The company that marks their products up 50+% or the one that is marking it up less than 10% ?? Who is taking advantage of the American Family? Think about it.

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