RV7ator said:
Sneering condescension doesn't favorably impress me, Steve. Re-read my post but think GM. Business must price on costs or they're dead. Your essay and my statement agree as far as economics are concerned. You've taken a long way around the barn to say the price of gas is manipulted and there's no competition. Congress keeps trying to make the same connection every time constituents squeal; subpeona those oil execs! Nothing ever comes of it because XOM/CVX/COP and the rest do indeed compete with each other for your gas dollar. There's no price collusion, and they don't set a price then add costs to assure profit. Though I'm paying 1,000% more for gas now than in the '50s, the share dividends have remained more or less the same (small) percentage. "The oil companies price on cost, not profit."
Ok, John, my appologies for the condescension expressed in my previous post. I was extremely shocked to hear someone touting the fact that there is too much competition in the oil market today. I strongly disagree on that point. My comments on competition are not expressed in terms of an oil company competing against another for consumer dollars. No, in this discussion of alternative fuel and Ethanol I am talking about competition for the use of petroleum products in general. Ethanol is becoming, and I think will continue to become, a strong competitor for petroleum in the eyes of consumers (Finally). There may be other fuels as well, but today the world has started down the road of using Ethanol as the means to wean itself away from reliance on petroleum.
I strongly believe that competition will always benefit the consumer. Look at your own choices in deciding which airplane to build. Do you think your abilities to build the airplane of your dreams would be a realistic possibility if it were not for the competition amongs kit manufacturers, engine manufacturers, avionics, instruments, etc., etc. Take your pick on various components of your project and tell me that competing manufacturers are not good for you, the consumer, in finding what you want at a reasonable price?
Ok, so maybe I would argue with myself somewhat on the idea that these components are reasonably priced. However, that also addresses the issue of price not being set by cost. Why can Garmin sell a GPS for the auto market for at least half the price they are selling an aviation GPS? The price we pay is not based solely on the cost to manufacture that product. It is based on the demand of that product by the consumer market. There is a much larger consumer pool in the auto market than in the aviation market. So, they will set their price at a mark that will insure they cover their costs and then make XX% profit on each unit in the auto market. They also know that the market is much smaller and demand much greater in the aviation market for their product so they will set that price at a different mark than the auto market because they know the demand will support that price. It has very little to do with the cost to produce it. In fact, if you were able to look at their books, you would most likely see that the XX% profit on each unit for the auto market is not going to be the same XX% profit on each unit for the aviation market. Why is there a difference? Because the price of their product is being driven by the demand. Simply put, it is that way
because they can price it such. Price here is set by demand, not cost.
No condescending statements here this time but I absolutely must disagree with your statement that "The oil companies price on cost, not profit." Granted they must cover their costs, so that is an ongoing battle. They must maintain the price of oil at a level above what they have to expend to extract it from the ground but if the price of a barrell of oil were solely built around that cost, oil would not be $60.00 or greater a barrell today. It would be much less. The added price consumers pay is built on demand (or in the case of oil, the expected future demand) for their product . OPEC would not be in such a colusion if this were not so. Daily, that world collaberation of petroleum producers tries to manipulate the oil market in order to maintain their profit. Demand for their product is what allows them to do that. Not the cost to extract the oil.
To talk about share dividends in terms of product pricing has little relevance. It only servers to confuse the issue. Your share dividends may indeed be set by the board of directors of the company based on costs to produce. That is very different than setting the sales price of a product in the market.
So, John. My appologies for the insensitive condescending manner in which I disagreed with your statements earlier but I do disagree with them none the less. Peace be with you and yours, may the force be with you, live long and prosper, and above all, keep building that airplane. I also have an airplane to build and will go back to doing so. Hopefully we can meet at some flyin sometime in our respective beauties. When that happens I will gladly shake your hand and say glad to know you.
RVBYSDI
Steve
RV9A slow build
Darn, I hate deburring all those holes!
