On Gas Station and Oil Company Profits

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A fitting article for the upcoming travel season (excerpts from SmartMoney.Com; Comments in red by yours truly): What Gas Stations Won't Tell You 1. "Good luck finding the best deal." Most stations are branded — meaning the name of a major oil company hangs out front — and must buy gas from their proprietary company. With a lock on sales, the oil companies charge each station a different price depending on various factors, such as the station's competition and its location. That means a station can pay as much as 46 cents a gallon more than one down the street, and that cost gets passed along to you. 2. "I hate high gas prices too." Stations earn on average between 10 and 15 cents on a gallon of gas. As fuel climbs, gas stations must shrink their profit margin to remain competitive, meaning they earn less per gallon than usual. But another big cost during tough times is something they can't do anything about — credit card fees, which add up to about 2.5% of all purchases. Last year gas stations' revenue from fuel grew 25%, while the fees they paid to credit card issuers jumped 40%, to $5.3 billion. How do station owners make up for lost revenue? "Prices go up like a rocket and come down like a feather," says Richard Gilbert, a professor of economics at UC Berkeley. For several weeks after wholesale prices drop, stations can earn as much as 20 cents a gallon before retail prices are lowered to reflect the change. 5. "...and don't even consider applying for our gas card." When it comes to gasoline credit cards, a little research goes a long way. Similar to store cards issued through retailers, gas cards are riddled with drawbacks. APRs are high, starting above 20%; many don't offer rebates on gas purchases. 7. "It's a gallon when I say it's a gallon.It's hard to know if you're getting all the gas you paid for at the pump. The state or county weights-and-measures department usually checks pumps for accuracy, but in some areas it can be years between inspections. In Arizona last year, 30% of the more than 2,000 complaints the state received were valid, and it levied $167,000 in fines. The good news is that it's often easy to catch the most common problem: Older pumps in poor repair may begin charging you for gas before you've pumped it. Check the meter to make sure it registers $0.00 before you begin and doesn't start charging you before the fuel is flowing.
8. "I might gouge you on a soda, but my coffee's a bargain."
With margins on gas taking a hit, stations are increasingly looking to their convenience stores for income. In 2005 gross margins for in-store sales were 30%, while the margin on fuel was 7.2%, according to the National Association of Convenience Stores. Given the stats, you'd assume the average Kwik-E-Mart to be a terrible place to buy just about anything. But that's only partially true. Stock that usually sits on the shelf does tend to be vastly overpriced, so if you forgot ketchup on the way to a barbecue, you can bet you'll pay a lot more for it at a gas station than you would at a supermarket, says David Bishop, director of convenience retailing for Bishop Consulting. What about popular beverages? You'll pay more for a 20-ounce soda at a gas station than you would for a 2-liter bottle in a supermarket; the average price for a liter of water at pumpside marts in 2005 was $1.24, a markup of 55% over wholesale; and energy drinks cost 50% over wholesale, according to Bishop.

Note from sender: As the majority of gas stations’ profits are obviously made on non-fuel items (See #8 above) and gas stations ARE in control of how competitive THEY COULD BE on fuel-related items (See #2 above) while remaining within the letter of the law, consumers can strike back by ceasing all non-fuel related purchases at gas stations. The tactic not only forces gas stations to immediately become aggressively competitive to retain or lure back consumers, but some stations may even become investment liabilities to oil companies. Simply stated, many gas stations are franchises and are dependent upon the owner’s interest and investment to remain open. Imagine the expense the oil companies would have to endure to fund these franchises after franchise owners liquidate their properties and oil companies require outlets to sell their unjustifiably priced product. The loss of such investors would certainly garner the attention of the purveyors of corporate greed mush faster than the half-hearted, government investigations conducted by officials whom, in all likelihood, have their fuel expenses paid by the taxpayer and thus haven’t a clue as to what a true financial disruption high fuel prices mean for the taxpayer (Starting to feel like there is more than one perpetrator here folks? Also note that approximately 20% of fuel costs are “taxes”…..) . So when you need to make your next trip for gas, remember to “pass” on the candy, the tobacco, the soda, and the sandwiches, and always remember to return the favor of high priced gas to station owners even further – by paying with a credit card (costing them more money and while potentially rewarding you with perks a la #5). Be particularly mindful of this during the upcoming Memorial Day, Fourth of July, and Labor Day weekends – weekends that provide much profit for all of those “oil company-related individuals” who claim that they have “no control or responsibility” over the situation. And the faster and more widespread the word gets around, the more effective the tactic Keep this up until gas returns to around $1 to $1.50 per gallon – for high grade