Cost of Heating oil; Cost of lumber?

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George wrote:

And that attitude is what is wrong with business today. I've been a small businessman since at least '68, and to date I haven't found it necessary to screw my clients out of the last dime in order to get by.
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Charlie Self wrote:

I'm sorta' w/ ya' on this, Charlie, altho I understand the other as well...
Unfortunately, it's the distributors who control the pump prices (essentially, local markups are pretty competitive in most places) and they seem to be, as you note, very prompt in the up direction, not so prompt in the other...
I don't have data on what the refiners are doing (in the relatively few cases where they and the major distributors aren't the same)...I suspect the independents are following the big boys because they'd get crushed if they didn't.
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Duane Bozarth wrote:

What I was writing of was at the local station level. Go in Friday and see a truck filling the tanks, and an 8 cent increase on the pump. Go by Sunday, and see another 8 cent increase, and another on Wednesday, but the next truck doesn't arrive until that Friday.
That's neither distributor nor refiner. Just neighbor screwing neighbor out of a few bucks.
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Charlie Self wrote:

Actually, if you were to investigate, you would probably find that each of those increases at the local station did reflect costs his distributor had just passed on to him...I know for a fact that's what happens here as I know two local re-distributors/retailer wells as well as knowing what we do on the driveway pumps at the local farmers' coop of which I am a member...
Here in this last week we got hit w/ two increases in one afternoon plust another the next day...
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Duane Bozarth wrote:

Possible, though I'm inclined to doubt it. This stuff comes COD to the dealer (country store). He pays as soon as it's pumped into his tanks. That's it. No more to that transaction.
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Charlie Self wrote:

I'm still expecting he's getting notices regularly from his distributor and simply posting them at that time as are most other retailers...
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Not to mention his station has a contract with the distributor, even if it's not actually franchised from them, which specifies his rights and obligations.
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George wrote:

And those are written w/ a <whole> lot more "obligations" than "rights", for sure... :)
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George wrote:

That shows you don't know a thing about how country stores operate. These guys will not accept contracts from any one distributor.
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Charlie Self wrote:

And that assumes the store is in a location they have a choice of distributors willing to sell to anyone on a hit-or-miss business. That's not common here--in fact, it's quite uncommon. I suppose in more populated areas, there is enough competition to keep such an arrangement workable.
Ah, well...shows nuttin's the same <every>where... :)
I still can understand him keeping prices at the pump in line w/ everyone else even if I would personally prefer he didn't...
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Snicker.
I know that your case is the exception, rather than the rule, if true. Y'see, there's more people overall who want to sell gas than there is gas available most places. Makes the distributor pretty powerful indeed.
Of course, I can't speak for your one station, only the ones I know.
The little two-pump places are gone here. Can't afford to pay the environmental bond on the underground tanks
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George wrote:

Yeah. Our little two pump place just installed a supplement to its six current pumps.
There appears to be no shortage of gas available here, which may be why our prices are lower than most other places. We are between two small cities, so there are numerous distributors available...and plenty of stations. But I was writing of country stores...and, IME, it has been a couple decades since any of those in this area were "two pump" stations. Gas is basically honey for the trap that draws people inside for other items, all ingeniously priced high, but not so high it is worth driving 10 miles into the nearest town.
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Charlie Self wrote:

That's hardly what I'd consider "country store"...that's larger than the single largest station in town, here (except for a couple of the truckstops)...
And, one of the two fella's I mentioned earlier is the largest retailer in town w/ three stations and the business (he's 2nd generation) has been w/ the same nationally branded distributorship since in the late 40s and that distributorship has threatened to cut them off because they're not large enough volume...
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On Thu, 18 Aug 2005 14:37:34 -0500, Duane Bozarth

I think Charlie is trying to say you should sell things based on what you paid for them, not based on what you are going to have to pay to replace them in the normal course of business. I disagree. If the wholesale price of gas goes up $.05, it is immaterial how much I paid for the gas currently in my storage tank, the real question is how much do I have to pay to replace whatever I sell to you at the pump. The difference between my current replacement cost and my current pump price is my real profit. Yeah, I wrote that as if I owned a station. I don't, but the concept is the same whether we talk gas, bread or houses. As an exagerated example, If you bought a house 20 years ago the price you would want to sell it for would have nothing to do with the price you paid, but a lot to do with what it is going to cost you to replace that house so that you still have a place to live.
Dave Hall
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Dave Hall wrote:

Specious analogy. If you sell houses for a living, you might make the comparison and call it valid. But to say you live in a house and have to get more for it than you paid so you can pay replacement costs is not any kind of analogical situation.
You and George are a business shark's dream.
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If you bought a house 20 years ago

Tee-Hee.
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... snip.

I'm with Charlie here on this one. Yes, the business is going to pay $0.05 per gallon more to replace what is currently being sold (that was purchased for a price $0.05 less than the new price), but the business is also going to sell that new product at the corresponding higher price. The only thing that raising the price on the current inventory does is increase the cash flow to accomodate the new price, but then the new priced gas (assuming price stabilizes) is now providing an additional $0.10 per gallon (you didn't think the $0.05 increase was not going to be added to the new gas as well, did you?). Acid test is if the price of wholesale goes down $0.05 per gallon, does the retailer immediately lower the price of the gas he purchased at the higher price (but had previously covered by raising prices on lower-cost gas before the new price hit), or does the retailer wait until the new, lower priced gas is delivered and paid for?
Not saying there is anything illegal about any of this, it just is irritating and does nothing to encourage faith in one's fellow humans. OTOH, if the dealers in an area have some sort of "deal" that assures nobody strays outside of certain band of prices, then *that* is illegal.
+--------------------------------------------------------------------------------+ If you're gonna be dumb, you better be tough +--------------------------------------------------------------------------------+
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You're normally a thinker, not a wisher, so let me try another example in hope that at least you will catch on.
Tanker drives up to deliver 10,000 gallons, on which I, as owner stand to make, say eight cents a gallon . Seven thousand later, the price jumps eight cents a gallon. Do I:
1) Forfeit all my profit, from which I expected to pay my expenses and put a chicken on the table?
2) Try to get some money back to protect my cash flow by pushing up the price on the remaining three to replacement cost?
3) Just buy less gas to sell for the same potential eight cents next time because I have less money?
You make the call.
Now, since during times of rising prices I take it in the shorts regardless of the option exercised, my hopes are for falling prices, where I may recover some of my losses in a rising market and stay in business in spite of a rather irregular cash flow. I can only do this by holding pump prices during a decline in distributor prices.
Oh yes Charlie, the logo on the truck that pulls up to fill my tanks need not match the logo on the sign. My distributor supplies gasoline to several "brand" stations, and, especially at night, is prone to topping me off with whatever truck has some fuel left in it. That way he doesn't have to take it back to the depot with him. Same distributor, different logo.
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George wrote:

And that has what to do with anything? Locally, distributors come out of the tank farm and supply just about everyone, and just about everyone knows it. Big surprise? Maybe for you, but it's been going on for 35-40 years, IME.
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So you _knew_ that your "country market" places really were the same as everyone else with dependence on distributor and chided me about it nonetheless? Shame on you.
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