GDP growth was low in Q4, but in a bit of unexpected news, exports were also way down due to retaliatory tariffs.
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I love your soft-core sarcasm.
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Meanwhile details of the tariff refunding program are in the news today. Computer system will transfer funds to payers. No info on where funds will come from. Govt bonds? Approval by Congress required.
Media seems to find this story boring. Not much attention. “News for entertainment ratings” is bad policy.
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And of course the companies that paid the tariffs will no doubt lower their prices to reflect the amount of tariffs passed on to consumers via higher prices, right?
Bueller… Bueller…
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Yes, some will reduce prices to gain market share and competitors will follow. It’s an easy strategy. It will be fun to see what fraction gets passed along. Or will it be temporary sales and discounts.
This is adorable. Did you have your 1st grader write it?
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Cutting prices to gain market share is not common but this is one situation where it might work.
Last I heard major companies like Frito Lay and Kellogs are cutting prices.
I wonder why they are doing that? And you say no one else will.
Because they are getting significant pushback from consumers who are trading down to generics. It has nothing to do with tariffs, it’s their attempt to shore up overpriced products. The really smart marketing guys said “Hey, let’s see how far we can push this”, and they found out. The are losing not only market share but also gross profitability.
In their attempt to squeeze out that extra nickel they have cost themselves a dollar. If there’s a refund from the tariff account, don’t expect them to bounce that back to consumers; it’s a one-time thing, not a systemic lowering of their costs.
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He’s right for different reasons.
People no long need jobs. Prior employers and prior companies might conclude.
Price softness on tap.
Those paying tariffs are experiencing the same pressures from consumers. They responded various ways. Some eating tariffs, some raising prices, sometimes partially eating tariffs. Businesses have a full range of responses including trimming prices when tariffs are reduced.
Rockets and feathers. Rockets and feathers.
Prices go up like rockets, come down like feathers. You want a real time example? Look at the gas pumps, which have gone up in price 70¢ in just the past two weeks.
Yet we know the gas coming out of those pumps was purchased weeks, if not months ago and refined from oil purchased at far lower prices, transported by ship or by pipeline, transported to a distribution hub and then into a tank truck and finally to your local gas station from where it is pumped into your car.
And yet you are already being charged higher prices, when the oil and gas from which it was derived was purchased at MUCH lower prices. Why is that? Why it’s because they can short term profit and point to “the market” and say “Well oil costs more now” even though it didn’t when the oil you’re buying didn’t.
When “they” get a tariff rebate check, don’t expect them to run to the pump and lower the prices for a week, they’ll just stuff it in their pocket and continue to price gas “at the market”.
Rockets and feathers. That’s real world.
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It costs more to replace the inventory, which is fungible.
Sometimes gas drops in price and the seller is effectively losing money. Same thing in reverse.
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To me, what goofy is pointing out is that while the above looks to be true, what happens is that the price of a barrel of oil when it drops is not usually (if ever) reflected in the price at the pumps immediately as it has this past two weeks when the price increases, but takes a while to actually show up - about the time for that cheaper barrel of oil to be processed, transported and arrive at the pumps. The reverse does not happen and suggests to me that the oil companies are not losing money.
Pete
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Suppose you buy TSLA @ $100 and it goes to $200. Would you sell it to me for $110? Why not? No one is going to sell you $TSLA under $200 to replace the TSLA you sold me at $110.
The Captain
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Most gas stations are franchises. Their owners decide what to charge. They have contracts to buy at some discount from market.
They have access to current price of RBOB minute to minute throughout the business day. In my area price is usually RBOB plus abt $0.50/gal. Most of that is probably taxes and a small profit for the station. The reason most stations now have convenience stores. That’s where money is made. The gas is almost a loss leader (especially if billed for the staff and overhead).
Gas pricing is not an issue. The system is well controlled. Price can be adjusted daily, hourly, or whatever fits the situation.
Gas in my area is posted this morning at $3.35 up from $2.59 last summer.
Oklahoma has lowest gas prices in the nation usually. In MO as you drive down I-44 toward Oklahoma gas prices steadily decrease matching OK price near the border. I wonder who eats that differential. If you aren’t competitive you go out of business.
Yep, XOM is not up 5% over the last month while the S&P 500 is negative because of XOM losing money.
Do you think they do the reverse? When they get a temporary break for whatever reason, do they run out to the warehouse and mark down everything they’ve bought at a higher price because “replacing the inventory” will be cheaper?
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Gas stations typically use replacement cost accounting. Clearly, they do reduce the price of gas sometimes. They don’t empty their tanks before repricing.
Edit: I had to drive across town today. On this side gas is $3.10 to $3.20. Over on the other side, a different county, it was $3.80. I can’t account for that, other than the “charge what we can get away with” factor. So, I’ll modify my original statement to:
Gas stations typically use replacement cost accounting, plus a “whatever we can get away with” factor.
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