Don Jones

Tech | Career | Musings

Folks often make important decisions based on inaccurate, unverified assumptions. Whether you’re at work or at the voting booth, it’s important to research the facts that underpin your assumptions – and what you’re being told – and either validate or refute them.

 

The Price of Gas

For example, folks often rail against oil companies for the high price of gas. And there’s no question that oil companies make a lot of revenue – but who really keeps all the money?

On average (it varies by state), $0.50 of each gallon goes to the government in the form of taxes. The gas station owner keeps about 2.5% – almost nothing; they make their living by selling items from the convenience store, mechanic services, and other stuff. The gas is just to bring you in. On a $4 gallon, that’s about $0.10 per gallon.

So far, the oil company is getting about $3.40 on a $4.00 gallon. But here comes the government again, with the ever-popular invisible corporate tax. On oil companies, it’s around 55%. Yeah. The Department of Labor and Statistics figures that it costs about 40% to manufacture and transport the cost (it varies a lot; I’m averaging out the last decade), so of that $3.40 the oil company gets, roughly $1.40 is cost-of-goods; that leaves about $2 in gross profit. Assuming zero overhead, zero R&D, and zero other expenses (which isn’t the case, obviously), the company pays about $1.10 in taxes per gallon, and keeps about $0.90.

That’s a 22% profit margin, roughly, which isn’t bad – but the government is getting almost twice that much, close to 40% of the retail cost per gallon. Oil companies’ massive revenues come from their massive sales volume, not from massive profit margins. The government’s the one getting rich on oil.

So when you think a politician is soft on Big Oil… maybe they’re just sweet for the IRS.

 

HOT COFFEE

Remember many years back, when the old woman got burned by the hot cup of coffee at McDonald’s, and sued for millions?

Pretty much everyone made a joke of it. I mean, it’s coffee. It’s supposed to be hot. WTF?

Well, much of that feeling came from the massive publicity heaped on the issue by McDonald’s lawyers, and by like-minded industry groups who were thinking of the companies. Using that and a couple of other cases, they were able to get voters and politicians to pass sweeping tort reforms, limiting the damages someone could collect from cases like that.

Thing is, that old lady was severely damaged. Her coffee wasn’t hot, it was superheated – well above boiling. It literally stripped the skin off her inner thighs, causing permanent nerve damage. She had to go on medications for the rest of her life, couldn’t walk normally (the muscle tissue was damaged), and generally lived in hell. A million bucks is a lot of money, but would you be happy with it if someone stripped skin and muscle off of your legs, essentially ruining your life and condemning you to a permanent drug haze?

I made the same assumptions almost everyone made when I first heard of the case – more ridiculous lawsuits! But the tort reforms in most states now mean that there’s a hard cap on how much money you can receive above and beyond your actual medical costs – and in terms of compensating you for your life essentially being taken away, it’s not much. In Nevada, where I live, it’s about a million. If I were damaged badly, and unable to work, a million bucks wouldn’t last me through to end of life. But that’s my cap, thanks to tort reform.

Big corporations fought for those tort laws… so who benefits from the laws?

They won by mocking the “trial lawyers” who go after “big settlements” on “ridiculous cases.” It’s easy to get the public in a gnash against trial lawyers; nobody likes ’em. But pay attention to who is riling you up against the trial lawyers, because they assuredly have a motive, too.

 

Point Being

Be real careful about what you see online, hear in the news, and what’s fed to your brain in general. There’s always another side to the story, and it’s never as simple a narrative as you’re being handed. Research. Make sure you’re getting the full story. Make sure it all adds up in your head – and that you’re not simply buying a simple version of the “truth” that someone wants to sell you. Make sure you know the motives. It doesn’t matter which side of the argument you eventually decide is “yours;” what matters is that you’re not letting someone lead you to that decision. Make it on your own.

 

 

 

One thought on “Verify Your Assumptions and Gripes

  1. martylichtel says:

    Good commentary on critical thinking skills. Your points on gas prices are interesting. It also made me think about the bizarre consumer behavior around getting the “best” price on gas, where people often go only to the cheapest gas station – sometimes burning gas waiting in a line – even if a more convenient (and empty) one is only pennies more per gallon. I think: When else do people go to such lengths to save what amounts to a buck or two on a total transaction? The hot coffee story I’d read more deeply about some time ago, and would add, the other unfortunate aspect to the incident was that the lady originally just wanted fair compensation for her medical bills. McDonald’s refused. Only then did it become a higher dollar amount and was then misrepresented in most media reports to suggest that the lawsuit was for a big dollar amount from the start, as additional evidence of it being frivolous when it was not.

Comments are closed.

%d bloggers like this: