A litre of petrol here in Australia costs $1.10 at the moment. A litre of coke costs about $2.50. Water even costs more.
Isn’t petrol sucked out using high capital intensive eqiupment? If so, how can they make it so cheap as compared with other liquids?
I’ve seen this observation before – how it’s rather remarkable that gasoline is so cheap, cheaper than bottled water, despite being such a complex and difficult product to make.
A major reason is economy of scale. Petroleum production equipment is capital-intensive, but there’s a huge global infrastructure producing huge amounts of petroleum products in bulk. Gasoline is also sold in bulk at retail – it’s pumped out of a big tank. (Petroleum products that are not manufactured on the same vast scale as gasoline, such as solvents and fine chemicals, are much more expensive.) The infrastructure needed to make soft drinks or bottled water is also capital-intensive (for Coke, plastics manufacturing for the bottles, sugar refining, extracting and synthesizing flavors, etc.). But Coke is still pretty cheap when you buy it in bulk, as a syrup to be added to carbonated water. Tap water is very cheap, even though it requires a huge infrastructure for collection, treatment and distribution. Much of the cost of a bottle of Coke is in the packaging, distribution and marketing.
If you got gasoline in 2-liter plastic bottles, and if there were constantly high-budget TV commercials about how young, exciting people prefer Shell or how filling your car’s tank with ExxonMobil fuels will remind you of childhood drives in the countryside, how much do you think it’d cost? =)
I would assume that part of it is because bottled water and soda have a HUGE markup. Is there anybody around there that knows how much a restaurant charges for a glass of soda, and how much they pay?
There was a thread about hot dogs and drinks at Costco where we discussed the cost to the retailer of soft drinks. This calculator lets you input what you pay for syrup, water, CO[sub]2[/sub], cups and ice and calculates your profit. (It’s a commercial program but the screenshot shows an example with a 9 cent cost for a 16 oz. serving.) This site says the cost of syrup (sugar and flavor) for a 16 oz. drink is three cents. Be warned that this price is highly susceptible to commodities market prices for sugar – it may sometimes be as high as six cents per cup, leaving soft drink sellers (particularly movie theaters) to pass this increased cost on to the customer.