The Economy - Where is the ideal spot?

[GailL1]

What are some of the ways that prices will come down from their elevated levels of the pandemic?

1.  The Balance - prices don’t go down but they don’t go up either with very little inflation - just enough to spur a little continued growth and widening of the economy. But this may also mean a slow down in wage growth.

2.  SLOWEST sales - that one is up to us - the buying public - (very little inflation)

3.  SLOWER to NO Sales but production is covered - again up to us - but a more drastic maneuver than #2 because growth is also stymied to a certain extent so hiring and wage growth would also be reduced.  (stagflation)  

4.  NO Sales and an abundance of inventory - the fastest way to reduced cost but this may be a curse because it would involve many layoffs and perhaps a Recession or an even more drastic Depression. (deflation)

I know many of you are waiting for some prices to really come down especially in rent, food and other commodities but to be perfectly honest, will they actually come down without us suffering from an economic downturn?  

Auto insurance could  come down if we stopped having car accidents, car thefts, bad weather destroying cars or even less people driving around without insurance or being UNinsured.

But what is gonna make rent go down?  Supply of desirable rentals that are offered at affordable rate?  What is an affordable rate ?  

What is an affordable anything except the price that one is willing to pay for that thing.

So what is your description of a healthy, robust American economy and how would you think we could get there?  

[papawofboo]

Not sure I understand the point that you 2 are making. 

Oil company is on a cost plus deal. The more something cost the more the plus. Our son worked on the pipeline in ND. His salary was unreal, but here is the kicker. He bought a 5th wheel camper and a big ole truck on the extra money they paid. He put a tank for gas in the bed of his truck, and they paid him so much a day for it to be there just in case something came up and it was needed, they also paid him extra for housing and for a food allowance. All this went into the price of a barrel of oil. At least this "cost" helped a lot of people. From the people who made the truck to the person cooking in the diner. 

Now when it comes to retail, say a farmer sell's you a 1000 cartons of eggs at a $1 per carton. You put a 100 cartons out for sale at $1.25 and they sell out. Next day you go up to $1.39 and they sell out, see where this goes. 

Some way pricing has got to be controlled. At least the cost ++ helped a lot of people where the retailer just put the money in his pocket.

By the way Gail, I've known a lot of CEOs and owners of business. Before you start patting them on their back you might want to put on some gloves.

To me the economy is a big circle, I don't know if anyone is smart enough to break in it and not screw it up more than it already is. I know it's not me. I pray every day that our leaders work to help us and not themselves.

[Tonster521]

@papawofboo Oil companies are affected by many factors. Probably the most important factors not seen by the public is supply and demand. The cost of a barrel of oil fluctuates daily if not by the hour (spot price). Brent crude (North Sea) affects the international market. West Texas Intermediate (WTI) affects the USA and there is an affect from the Canadian Crude Index (CCI). From time to time, OPEC, Russia, Iran, or Kazakhstan either increase production to lower prices or reduce production to increase prices. All of the above will either increase or reduce potential profit margins before the costs of labor and refining occur. Most oil companies enter into forward contracts locking in a negotiated price with the buyers. Think jet fuel for airlines that know within reason how much fuel they need during a certain period of time. On the other hand, consumers, like us, buy gas, diesel, fuel oil,etc at spot prices.

So, with all this uncertainty, can an oil company simply add a profit margin (you refer to plus) to their costs whether the actual cost of oil, labor, or refining? The answer is no. Bankruptcies occur in the industry which is risky. I am providing a link that addresses bankruptcy with oil companies https://ogv.energy/news-item/over-100-oil-and-gas-companies-went-bankrupt-in-2020/ Hopefully I copied and pasted it correctly.

[SpringIsHereVA]

Papaw @papawofboo , what about taxes on all the income and add ons? Do oil workers get hit with a high tax bracket? Take care, Nicole  👵

---

➡️[*** Papaw wrote on Wednesday 4/30/25: Not sure I understand the point that you 2 are making. 

Oil company is on a cost plus deal. The more something cost the more the plus. Our son worked on the pipeline in ND. His salary was unreal, but here is the kicker. He bought a 5th wheel camper and a big ole truck on the extra money they paid. He put a tank for gas in the bed of his truck, and they paid him so much a day for it to be there just in case something came up and it was needed, they also paid him extra for housing and for a food allowance. All this went into the price of a barrel of oil. At least this "cost" helped a lot of people. From the people who made the truck to the person cooking in the diner. 

Now when it comes to retail, say a farmer sell's you a 1000 cartons of eggs at a $1 per carton. You put a 100 cartons out for sale at $1.25 and they sell out. Next day you go up to $1.39 and they sell out, see where this goes. 

Some way pricing has got to be controlled. At least the cost ++ helped a lot of people where the retailer just put the money in his pocket.

By the way Gail, I've known a lot of CEOs and owners of business. Before you start patting them on their back you might want to put on some gloves.

To me the economy is a big circle, I don't know if anyone is smart enough to break in it and not screw it up more than it already is. I know it's not me. I pray every day that our leaders work to help us and not themselves. ***]

---

[papawofboo]

Let's just say he had a very good accountant.

[papawofboo]

I have been told for the longest that the big oil companies could only make so much of a per centage on a barrel of oil. You seen to be good at research so maybe you can find out if it is true. If so then something like that could be put on other items. First thing that comes to mind is drugs.

As long as people get raises you are going to have price increases, no two ways about it.  Rent is never ever going down, only way it could is if there becomes less people. Some food prices are going to have their high and lows, like eggs. Forget the bird flu, chicken are going to lay eggs. Old saying about egg prices, each morning farmer counts his eggs, if he has more today than yesterday then he lowers the price, if he has less then he raises price.

To me, copid is the problem. These large corp. found out what they could get away with. They found out they could cut labor, so we have longer lines. That is a big saving, but they also learned that people would pay higher prices. The CEO of Kroger got a $26 MILLION bonus. If the head of the largest food chain got a bonus like that, then just how much money did they make, and how did they make it? Government stepped in on HD, Lowes, etc. about hiking prices during disasters, they didn't do that on the food sector.  

[Tonster521]

@papaofboo It appears you are referencing profit margins. Most oil companies are profitable, but not to the extent that many think. The cost of finding and drilling for oil reduces most oil companies' profit margins. In the Bakken, North Dakota, many wells exceed 10,000 feet or more. In the Gulf, wells may exceed 15,000 feet. Unlike Saudi wells wherein many wells find oil at 1,000 feet or less, Aramco is the most profitable.

I will try to link an article that reports on Apple's (not a fruit company) profit margin. https://www.cnbc.com/2025/01/30/apples-gross-margin-hits-record-as-services-business-keeps-growing.h... I am sure you understand that Apple's margins will vary from product to product just like a grocery store's products. However, just focusing on the I-phone, it is manufactured overseas costing the USA jobs and contributions to the SS program.

The grocery store sector has to address perishable food products.

[GailL1]

CEO’s do a lot of different things to indicate their worth - that their job. 

People many time note their increases but never the decreases which do happen.

Keeping a company going during the pandemic was a feat - keeping employees working - or most all of them was an accomplishment.

Keeping their stock from tanking was also not for the weak of heart.

The Oil business is a business all its own since it relies a lot on the world’s commodity pricing.  

Once I knew a very successful tool and die company that had about 30 employees and had been going for a very long time.  The owner decided that he was going to retire so he could have just sold the business for a very good profit.  But he had several very long standing employees that knew the business pretty well - so he offered the company to them for a very good price as an employee owned business.  He had NO takers - they all thought that the responsibility was too much for them to want to get into - 

So he sold it to another tool and die company.  

I think sometimes people think that owners or high ranking officials in a company really don’t work or get out more than they should earn.  I don’t - I see a good CEO as a very valuable asset that can make or break a company and pretty fast.  They work and they are paid as the BOD see their value.  

Kroger cuts CEO’s pay as company’s performance weakens

Rodney McMullen’s compensation in fiscal year 2023 fell by $3.5 million, to $15.7 million, largely due to a sharply lower bonus.

Published May 20, 2024

https://www.grocerydive.com/news/kroger-mcmullen-ceo-compensation-2023-grocery/716570/ 

He also resigned this year which cost him more than $11 million in bonus and stock payments.  And all of this was because the company was missing its target.  

[SpringIsHereVA]

Oh my goodness Papaw @papawofboo , lol - wonder if it is all legal.

➡️[*** YOU WROTE:  The CEO of Kroger got a $26 MILLION bonus. If the head of the largest food chain got a bonus like that, then just how much money did they make, and how did they make it?

Take care,

Nicole  👵