This is Why I Have Never Been Able To Stomach O’Reily For Longer Than 30 Seconds…

Is it really cynical? I think it’s a matter of how you base the numbers.

Lets see. Say oil is $10/bbl, production costs $5/bbl, and your net profit is $1.50/bbl. Ok, that’s 10% margin on the amount you had to spend ($15) to produce and sell X gallons of gas (a barrel of crude oil’s worth).

But when oil is $100 production is still $5 – it doesn’t take more work to make gasoline from more expensive oil – your profit is 10.50. That’s still 10% of your investment ($105), because the profit imargin is relative to the cost of raw materials.

But if the profit margin was based on a per barrel processed percentage, which in essence is the same as X gallons of gas sold, then the margin just went up 700%. When oil was cheap you sold X gallons and profited $1.50. When oil got expensive you sold X gallons and profited $10.50. 7 times higher; a 700% increase.

It’s been forever since I read an accounting book, but I seem to remember “cost of goods sold” being in there somewhere. “Profit per Unit Item” I don’t recall. Which is the right way to look at it? I think there would be less cynicism if more people knew what the accounting method was.

Last time I agreed with O-Really was when he sad his gas smell like camel vomit.