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Date:         Wed, 20 Mar 2002 09:52:26 -0800
Reply-To:     DaveC <voicebox@DNAI.COM>
Sender:       Vanagon Mailing List <vanagon@gerry.vanagon.com>
From:         DaveC <voicebox@DNAI.COM>
Subject:      Re: Gas went up $0.13 a gal overnight what's up?
Content-Type: text/plain; charset="us-ascii" ; format="flowed"

>*If* fuel prices skyrocket in our lifetime (which is very likely), many >things will change, but that is good. There are many things that *need* >to change.

Maybe these all do need to change, but those who control fuel prices won't allow a huge jump. The price will simply creep up. Remember, the fuel industry (mostly the investors and owners) reap the profits between the price they can sell a gallon of gas for, and the price they pay for a loaf of bread (for example).

In other words, let's say you're the national (or global) distributor of widgets. If you increase the price that you charge for a widget, you get greater profits. If the national (or global) economy is keyed to the widget, all products and services will increase (including the cost of your raw materials, the loaf of bread at the local store, bottled water, etc.) over time to absorb the increased cost of your widget. Your profit is slowly eliminated as all prices that you pay are increased.

So what do you do to get more profit? Creep up your price for widgets again. You reap the financial advantage between the profits you make until the cost of living creeps up again (inflationary lag) and eats up those profits.

If fuel prices leap, the entire economy staggers, trying to keep up with the huge price increases of everyday items without the commensurate increase in salaries which will, with time, eventually catch up.

Fuel price leaps are counterproductive for oil investors/owners.

Dave -- Dave Carpenter

Whatever you wish for me, May you have twice as much.


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