Warren Buffett Second letter to Investors

The second letter from Warren Buffett.

Gas price computation

Quotes

Globally, coal began to supply more than 5% of all fuel energies around 1840, more than 10% in the early 1850s, more than a quarter of the total by the late 1870s, and one half by the beginning of the twentieth century…

The inertia of existing massive and expensive energy infrastructures and prime movers and the time and capital investment needed for putting in place new convertors and new networks make it inevitable that the primary energy supply of most modern nations will contain a significant component of fossil fuels for decades to come.

http://europe.theoildrum.com/node/6828#more

A barrel of oil contains 5.8 million BTU and can be purchased today for $77.00. But in natural gas, using today's price of $4.80 per million BTU, you can obtain the same quantity of energy for $27.85.

http://gregor.us/transition/cheap-is-nice-but-its-not-everything-natural-gas/#comments

Subsidy rates benchmark

But for arriving at the per kg NBS rates, the Department had benchmarked them to the IPPs of urea (for 'N'), DAP (for 'P'), MOP (for 'K') and sulphur (for 'S'), which were taken at $310, $500, $370 and $190 a tonne respectively at Rs 46-to-the-dollar.

Buffers (physical ones) are expensive to create and manage, and it is difficult to gauge how much

of a buffer should be carried. Buffers should be carried for supply disruptions rather than market

risk; market risk should be managed through other methods like long-term contracts and options,

etc. Oil pool (financial buffer) was prevalent earlier when prices were moving in a narrow range

and the Govt. was trying to manage retail prices, but it would be less prudent to leave this to the

Govt (and better to let market forces of supply-demand manage it).

The WPI index which is used as a measure of inflation in the country. The weightage of petrol and diesel in them is as follows 

Gasoline  - 89bps

Diesel   - 202bps 

Interesting articles on Shale Gas and future

http://www.consumerenergyreport.com/2009/06/19/how-much-natural-gas-to-replace-gasoline/

http://www.aspousa.org/index.php/2009/11/facts-are-stubborn-things-arthur-e-berman-november-2009/

Brokerage charges and Effective BUY SELL price

The following sheet is useful in determining the price at which one should exit a particular scrip in order to realize the effective rate as entered. What I mean essentially is when we buy a scrip there are charges we pay because of which the effective buy price goes up and when we sell the effective sell price goes down. In order to calculate the effective sell price, you should enter the desired rate in cell C5 and press the Calculate button.

The brokerage charges that I have accounted for in the sheet are as follows

1. Brokerage at 0.3% on value of trade [Change cell C4]
2. Service tax at 10% on brokerage charged [Change cell C12]
3. Education cess +other tax at 3% on service tax [Change cell C13]
4. Exchange levy charges @.00357% of value [Change cell C14]
5. Transaction tax @ 0.125% on value rounded to nearest integer [Change cell C15]
6. Stamp duty @.01% on value [Change cell C16]
7. Demat Debit charges [Change cell C32]

The Cell E10 will give you the effective sell price in order to realize the effective desired rate of return.

Cell E13 gives the nominal price exclusive of brokerage at which you should cell to realize the desired rate of return.

You can view the excel file Here

Hope the sheet helps you!!