Thursday, May 04, 2006

Gasoline Prices, etc

Well, at least it looks like there won't be any silly "tax rebates" coming from the Feds based on the increased gasoline tax revenues. Still, it does look at least possible that some kind of investigation of those evil oil companies may be in the offing.
Oh, and on the more local front, our "business friendly" governor, Jennifer Granholm, is busy pressing for a windfall profits tax on the oil industry. Hmm, I guess the message is something like, "We want you to come do business in Michigan. Be careful that you don't do too well, though, or we'll come take your profits." Sounds like a winning message, doesn't it?
Of course, everyone knows that the windfall profits tax back in the Carter years worked so well that the prices at the pumps went down immediately, so why wouldn't it work just as well today?
That's exactly the problem, it will work exactly as it did then.

Imagine this scenario.
Staples buys paper from the manufacturer at $75 per whatever, then marks it up to $100. Every time they sell one of those units, they make $25 - or, 25% of the sale is their margin.
Suddenly, there's a shortage, or a labor cost increase, or whatever, and the cost to Staples goes up to $112.50. Staples then marks that unit up to $150.
Now each time they sell one of those units, they make $37.50, a windfall of 50%!
Oh, wait a minute - they're still only making a margin of 25% of the sale. Maybe there's no windfall at all.

Why can't everything be this simple and clear? Perhaps because we don't want to think, we just want to blame.