Running On Empty

[Turbonics]

Running on empty

Hit by high prices and fees, some gas station owners stop selling fuel


By THOMAS CONTENT
content@journalsentinel.com
Posted: May 23, 2007



As gas prices hit another record last Friday, Jeff Curro couldn't take it anymore.

He wasn't a motorist at the pump fed up by the blur of numbers spinning higher as he filled his tank.

Curro is a gas station owner who has stopped selling gas to his own customers.

After selling gas at N. 124th and W. Burleigh streets for 20 years, Curro turned off his pumps at his Shell station in Brookfield when the price he was being asked to pay was just too much.

Including the wholesale cost of gas and other taxes and charges, he was being asked to pay $3.44 a gallon Friday, a day when the competing stations down the street were selling gasoline for $3.47.

"Three cents a gallon doesn't cut it," Curro said. "It doesn't pay the bills."

Add to that the money he loses every time a motorist uses a credit card at the pump, and there was no reason to keep selling gas, Curro said.

Credit card companies and banks get an average of 2.75% on every gallon of gas sold, and credit card processing fees now rank as the second-biggest expense for gas station operators, according to the National Association of Convenience Stores.

"The way I see it is, I'm doing all the work of providing the labor, the wages, the electricity, the lighting, the maintenance of the pumps, the repairs and the insurance, which is quite substantial," Curro said. "I'm doing all the work, and somebody else is getting fat on me."

Curro isn't alone in deciding to not sell gas anymore. Casey O'Gorman did the same thing. In business for 25 years near State Fair Park, his West Allis service station is now doing business exclusively as Auto Analyzers. The Shell name came down a few months back.

"I finally had to just pull the plug on it and say, 'I can't afford to do it anymore,' " O'Gorman said.

High wholesale prices

Curro and O'Gorman are leaving a relatively small and disappearing group of service station owners who both sell gas and repair cars.

Independent auto-repair shops face competition from car dealerships and quick-lube repair shops, and in the sale of gasoline, they compete against full-line convenience stores.

Most gas stations today double as convenience stores, and although they generate more than two-thirds of sales from gas, two-thirds of profit comes from in-store sales of cigarettes, drinks and food, according to the convenience store association.

When drivers are paying more, they think that means higher profits for the filling station, said Bob Bartlett, executive vice president of the Wisconsin Petroleum Marketers & Convenience Stores Association.

The case of the two Shell stations stopping sales of gas illustrates the challenges faced by independent station owners across the state, Bartlett said. Nine of 10 stations in the state are independently owned and run, he said.

Between Feb. 1 and Monday, Bartlett said, the average wholesale price paid by service stations in Milwaukee to buy gasoline rose from $1.66 to $2.94.

Add in taxes paid to the federal and state governments, as well as transportation costs, and the average service station had to cover $3.47 on Monday, without charging any profit. On that day, stations were charging their customers $3.47 on average in Milwaukee, according to AAA's Daily Fuel Gauge Report.

"People are upset about oil and gas prices, but it's not this guy right here," Bartlett said of the independent gas station owner. "He's not OPEC. He's not refining it. He's buying it kind of like I am, right at the end of the line here."

Sales up, profit down

Curro has been thinking about shutting down his gas pumps for about a year, and he has complained to his supplier about prices.

When he shut down his pumps, he was charging $3.59 a gallon, 12 cents higher than the competing stations nearby.

"Even at $3.59, I was making 15 cents, but I was still giving 10 of those cents to MasterCard," he said.

Nationally, the Association of Convenience Stores estimates that sales rose 12% but profit fell 23% industrywide last year, and for the first time, credit card fees were higher than the industry's profit.

Lower margins on the sale of fuel and credit card fees were the two main factors behind the drop in profit, the association said, as profit margins on the sale of fuel dipped to their lowest point since 1983.

Until January, O'Gorman and the predecessors at S. 84th St. and W. Greenfield Ave. sold gasoline on that corner since 1938.

He says he never made much money selling gas but started seeing margins nosedive last year when gas prices rose.

"More and more, it was crowding out my real form of income," O'Gorman said, referring to car repairs.

"Then you listen to the public, and they say we're gouging them. Who needs to listen to that? I'd need to have my head examined."




From the May 24, 2007 editions of the Milwaukee Journal Sentinel --------

[GNVYUS 1]

I would ditch the credit card payments first and make customers go cash before I closed up just to screw over the credit card companies and hopefully start a trend.

I don't know much about how debit card fees work for businesses but between cash and debit cards, business should not drop off that much.

[getyousome]

There is station near my house that gives a discount when you pay with cash, it's not that much of a discount but it's still something.

[turbofish38]

Most states have laws saying that the cash discount is illegal.

I was reading something in the local papers about the gas companies buying or leasing the pumps. The owner gets a small fee for handling the money.Gas companies own and maintain the equipment. Also a lot less riskier for the store owner. The EPA goes after the tank owner when it starts to leak which is very appealing to most store owners. Could it be another step to futher pad the already deep pockets of the gas monopolies? You damn well know the big chains like Racetrac and 7-11 pay a lot less for gas than the mom and pops. No wonder there is legislature pending on some new price gauging laws in congress.

[JBenn911]

All of the stations around us are company owned. The "owner" actually leases the business franchise from Gulf, Getty, etc etc who owns the land, buildings, pumps, tanks.... In my town there is only one station that a non oil company entity actually wholly owns(they change gas brands very often)

[Steve Wood]

From a local paper:

This is an approximate breakdown of where your gas money goes, based on buying at $3 a gallon on the dot:

Crude oil: $1.68

Taxes*: 54 cents

Refining: 51 cents

Distribution and retail 24 cents

Store income: 3 cents


*National average


Source: U.S. Energy Information Administration

The Associated Press contributed to this report.

[forzfed]

One of my buddy's who owns a Gas station use to always get mad when someone put's in $5 and then pays with a credit card. His profits were 1.5 to 2 cents a liter in the winter months but as soon as the long weekend hits the profit goes up 7 to 15 cents a liter. He makes the most money this time of year.

Oil stocks on average will return 12% when bought in spring and sold in fall. But of course no one is making money.