How can GM lose $38 billion and stay afloat?

The answer is that, in late summer and early fall, gasoline prices didn’t go up as fast as crude oil prices. So the oil industry’s refining operations weren’t able to pass along the higher cost of crude.

Though U.S. pump prices are headed higher again, the drop in gasoline demand that follows the end of the summer driving season left refiners and wholesales with plenty of inventory, as it usually does every year. With all that gas sloshing around the system, and gasoline retailers competing for business, pump prices were kept in check. But global demand for oil remained strong, and competition from oil buyers in other parts of the world drove prices higher.

The reason you haven’t heard much about this is that "Oil Industry Profit Margins Fall" just isn’t as interesting a story as "ExxonMobil Posts Record Profits." But it serves to illustrate a point that a lot of readers have trouble accepting — that oil companies don’t control the price of oil and they don’t set the retail price of gasoline. Those prices are determined by the markets, which ultimately consist of consumers of the product like you and me.

The best way to “rein in” gasoline prices is to figure out how to use less of it. Once we do that, the markets will take care of the rest. Until we do, there’s little point in blaming oil companies for producing a product we all want more of.

I have never understood what Dow points stand for. The Dow fell 350 points. What do the points represent? When the Dow first broke 10,000 it was a big, big deal. But 10,000 what? What does it represent in layman's terms? I hate to bore you with such a basic question, but I've searched for an answer online, and not had much luck.
— Matt, Seattle, Wash.

We like basic questions. And the fact that so many people find them “boring” helps keep us in business.

The Dow Jones Industrial index is a formula created by Dow Jones and Company, the publishers of The Wall Street Journal. It was created 101 years ago when you could pick 30 of the biggest stocks and use those to represent the ups and downs of the broader market. This was before computers did the calculating, so it also had the advantage of providing a quick check on “the stock market” by adding up the price of just 30 stocks and then dividing by 30.

Over time, most of the original stocks were replaced, and many of the remaining stocks “split” — which has the effect of cutting the share price. (A $100 stock split “two-for-one,” for example, creates two shares worth $50 each.)

Every time a Dow stock splits, you have to adjust the so-called “divisor” — the number that’s used to calculate the Dow Jones average. The current divisor is: 0.123017848, which means if you add up the 30 Dow stocks and divide by 0.123017848, you’ll get the Dow Jones Industrial average. (For extra credit, you can calculate the divisor on your own, using the formula on Dow Jones Web site.)

So each “point” on the Dow is just a notch on a scale that is still widely followed around the world — sort of like a "degree" on a thermometer.

Which raises another question: With computers now available to instantaneously track the thousands of companies that make up the U.S. stock market, or even broader indexes like the Standard and Poor’s 500, how come everyone still asks about an index that follows just 30 stocks?

The answer, we suspect, is that for all the talk about embracing the latest technology, the competition for the hottest new investment ideas and the desire to discover the Next Big Thing, the folks on Wall Street are still a pretty conservative bunch.

But that’s just a hunch.

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