Re: Permanent High Gas Prices

On Wed, 11 Jun 2008 11:07:31 -0700, "Frank Howell" <fphowell@xxxxxxxxx> wrote:


But the Wal-Marts of today are predicated on cheap oil. Without it, the
12,000 mile trip from Asia that all those toasters, hair dryers, etc,
becomes uneconomical and new economic realities will have to be addressed.

But Walmart was cheaper when they still "bought American". Given how much
cargo a ship carries, I bet that if you sit down and calculate it out, the
cost of fuel for each toaster will be measured in tiny fractions of a penny.

Regardless of the cost of fuel or how much it adds to the cost of that
toaster, Walmart is still the winner because Walmart has The System. Walmart
has the buying power to dictate prices to producers. Little guys don't. Sit
down and talk to a salesman who's sold to Walmart sometime. Eye-opening.

Walmart has the distribution network. Each truck that leaves a distribution
center is loaded fully and according to an exact plan so that the merchandise
can be unloaded in the order needed to go directly to shelf. One trailer of
cargo stocks many departments. The little guys can't do that. They have to
buy from multiple distributors (another middle-man) and manufacturers, each
load coming in on separate trucks. And they don't have the inventory system
Walmart does so they either run out of stock or buy too much and have static
inventory.

Then there is their data processing network, held in awe by the rest of the
retail world. Dead stock is practically unheard-of. So is tying up money in
static inventory.

Look at it with some simple math. Walmart trailers are classified as "high
value cargo". At least at my old trucking company, that meant that the cargo
had a value of $1million or more. If I haul a trailer full of $1million worth
of cargo 1000 miles between the distribution warehouse and the store using a
truck that gets 5mpg, the math looks like this.

At $2/gallon for diesel

1000 miles
5 miles per gallon
200 Gallons used
2 per gallon fuel cost
$400 Fuel cost for the trip

0.04 fuel as a % of $1million load


At $5/gallon for diesel

1000 miles
5 miles per gallon
200 Gallons used
5 per gallon fuel cost
$1000 Fuel cost for the trip

0.10 fuel as a % of $1million load

So when the cost of fuel more than doubles, from $2 to $5 a gallon, the
increase due to fuel as a percentage of the value of the cargo goes from 0.04%
to 0.10%.

Big Fsking Deal!

Pick any value you like for the cargo and do the math again. It won't change
much. Wallyworld will raise the price 1%, cover the fuel cost and jack in some
more profit in the process and nobody'll notice.

A few things will change. Pepsi probably won't shipping trailer-loads of
empty Pepsi bottles (full 53 ft trailer, cargo weight under half a ton) from
the blowing plant to the bottling plant like they did with a few loads I
hauled. They'll install a blowing plant at the bottling company and ship
preforms. A big win for the company that makes the blowing plant and the
contractor who installs it.

But Wallywold will, if anything do BETTER as fuel rises, simply because
they're better at EVERYTHING in the retail channel than anyone else. Some
shaky big box stores will no doubt crash and burn. Kmart/Sears is probably
toast already. I hauled some Kmart freight. The contrast between them and
Wallyworld was stark and shocking. By the Wallyworld standard, Kmart didn't
have a clue.

Horse hockey. The economies will change, and our inventors will
invent.

Wishful thinking, but if not, what is plan B?

If I need a wet finger and I know as an irrefutable fact that dipping my
finger in water makes it wet, why would I even think about Plan B? It is an
irrefutable fact that creative American minds have ALWAYS risen to the
challenge. Exhibit A: WWII industrial production. Exhibit B: Computers.

Sounds like magical thinking or a religion. I thought only Liberals engaged
in that kind of fantasy. Maybe Mothra will save us from Godzilla too.

Typical of folks who can't do the math to resort to name calling.

I suspect that you'd not know an actual liberal if one hit you in the face.

All I see with Obama and Co. is more taxes, regulations, a continued
consolidation of Government power and the need to divert blame from their
failed programs to some more convenient target. Big Oil, big banks, etc,
but never Big Government.

Since I don't do media news (maybe a good plan for y'all too), I know nothing
about bama and co but I do know this. When blanket costs (economists have a
term for this but I can't recall it at the moment) that apply to everyone
equally increase, largeness and economy of scale always wins. It's really
simple when you think about it.

If I'm a small manufacturer making 1000 widgets a day and those widgets won't
fill even a single tractor-trailer, I'm at the mercy of the LTL
(less-than-truckload) carriers, the highest freight there is. The LTL
operator has to pay drivers, fuel, equipment, depreciation and all the other
costs of doing business and he marks those up, what constitutes profit, to the
customer. That would be the widget-maker.

>>OR<<

I save up my production until I have a truckload. I'm not dealing with LTLers
anymore but I have money tied up in my inventory plus I'm still out there at
the "retail" level of freight buying. Since I don't ship every day, I take
what prices are offered me instead of being able to make the market.

A Maytag, OTOH, that makes a hundred thousand widgets a day and requires say,
100 trailers to haul that freight off has a huge advantage. They own the
trailers. They used to own the trucks and employ the drivers (no markup
involved) but now that they've learned that they can squeeze hungry trucking
companies dry, they contract out the haulage.

With that kind of volume, they get absolutely rock-bottom pricing. I've seen
bills of lading for Maytag freight with the freight price listed that was
lower than the cost of fuel for the trip! The trucking companies do that
because it's cheaper to run at a slight loss than it is to dead-head a truck
at a large total loss. Plus it keeps the customer on-board.

Problem is, most of you peckerheads know nothing about what you're arguing
than what you've been fed by the media. On that basis, I imagine things do
look gloomy.

Out here in the field, the view is a bit different. I see a few things
changing but mostly things stay the same or improve or simply become
different. If the media hysteria spurs the streamlining of power plant and
transmission line construction, that's a win. If it spurs people to become
inventive and create new ideas, that's a win.

If it makes exburbia and soccer bitches careening around in 7000 lb trucks
called SUVs go away then that will be a BIG win. If it causes some
debt-ridden, living-beyond-their-means yuppies to lose their McMansions and go
bankrupt, that's a BIG win too.

If it makes big corps stop making idiotic political statements by locating
their facilities in the inner city, in or near ghettos (like IBM and HP did in
Atlanta) then that will be a HUGE win. If it causes the *sshole unelected
so-called city planners who've used zoning to force residential and commercial
districts far apart to get kicked out of office, that will be a win beyond
comprehension.

I ain't smart enough and my crystal ball isn't clear enough that I can predict
with any accuracy what is going to happen. Like any dynamical system that is
perturbed, the economy'll oscillate and jiggle around for awhile and then
settle down to some new equilibrium until the next disturbance comes along.
But based on history, all you doom and gloomers are simply blowing smoke out
yer *sses. Those that can, do. Those that can't stand around and bitch about
it.

John
--
John De Armond
See my website for my current email address
http://www.neon-john.com
http://www.johndearmond.com <-- best little blog on the net!
Tellico Plains, Occupied TN
There is room for all of God's creatures.... Right next to the mashed potatoes.

.

Relevant Pages

  • Re: The fix is in again on gas prices
    ... that will have trouble with rising gasoline prices. ... WalMart customers are affected by fuel prices to a greater ...
    (alt.autos.toyota)
  • Re: Amazon pricing.
    ... if they sell below cost. ... It's called smart business. ... They proport to hate WalMart.. ... afford to sell goods below cost. ...
    (sci.geo.satellite-nav)
  • Re: Comparing 3 numbers
    ... change references to A2 to the column with Bakers costs in it, ... change references to C2 to column with Walmart prices. ... item, unit cost, size, and cost per ounce. ...
    (microsoft.public.excel.misc)
  • Re: Amazon pricing.
    ... My point was that Walmart does this, ... WalMart *DID* in fact sell ... things under cost. ... Which is stating that your wife is a member of a union of prostitutes. ...
    (sci.geo.satellite-nav)
  • Re: Amazon pricing.
    ... attempt to get you to purchase other things at a profit. ... My point was that Walmart does this, ... WalMart *DID* in fact sell ... things under cost. ...
    (sci.geo.satellite-nav)
Loading