Oil Companies Profits and Poker

Here's an analogy that maybe some of the readers of this blog will understand when it comes to profits, profit margins, and the oil companies. SO much hoopla is made about the oil companies record "Profits" these days while we, the little people are stuck paying $4/gallon for gas.

Of course the oil companies are going to have record profits. When costs go up, so do profits assuming you are using the same markup. If you sell an item for $100 and it costs you $50, you have 100% markup and a 50% margin. Now let's say that item starts costing you $100 instead of $50. If you keep the same 100% markup, you need to sell the item at $200. Boom, you've just doubled your profits. HOWEVER!!! Your margin is still at 50%.

Let's take a look at a similar scenario in poker. Let's say you are crushing the $3/6 games for 2 BB/100. So you are making $12 every 100 hands. Ok, so you've been a good little poker player and your bankroll has grown and now you are ready to play some $5/10. Let's assume you still win at a 2 BB/100 rate. Now you are making $20 every 100 hands. That's $8 in extra profit every hundred hands! Yet your winrate is exactly the same.

Business is similar to poker in this way. When costs go up, it's like the stakes going up in a poker game. What's the point in moving up in stakes if that extra $8 per 100 hands is just going to get taken away by Barack Obama, Hillary Clinton, or even John McCain? There is none. You can risk less and win the same amount of money at $3/6.

Now let's turn to the oil companies. Contrary to some statements I've heard from some very ignorant fucks recently, the oil companies don't make the oil. They buy the oil, process it, then sell it. Oil is a natural resource. The rising cost of crude oil is like forcing a poker player to move up in stakes whether they want to or not. However, when they raise the stakes, so many politicians expect their profits to the same as if they were still playing lower stakes.

So you're a poker player. You've been winning $12 per 100 hands. Then let's say that all of the sudden, the lowest stakes online are $10/20. Ok, you deal with it, work on your game a bit and now you are making $40 per 100 hands. Nice! Now a senator steps in and calls you evil for making so much money per 100 hands and vows to take $32 per 100 and let you continue to have your $8 per 100. Does that seem fair to you?

It's all basic economics folks. Simple supply and demand. Is any of this getting through?