Posted on 05/24/2007 5:48:44 AM PDT by kellynla
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."
This has put the true problem into the open. When you start your car this morning, realize that your mobility depends not on BIG oil, BIG shipping, BIG refining, or BIG transportation. It depends on the willingness and ability of SMALL business to operate that gas station that keeps your car going. Any system that makes it more profitable to STOP selling a product will get just what it deserves..no product sold or available. The oil companys’ have profits much less than the tax revenue that accrues to the government(s), but the yelling is at the oil producers. Go ahead, yell at the local seller of gas, insult him, vilify the little guy, then swivel your neck looking for him when the gas pumps are SHUT OFF. You’ll have gasoline for only so long as someone is willing to sell it. This is how they make their living, it is not a hobby.
They can't negotiate lower credit card fees like the major chains do either.
Independents have a very difficult time making a living in low margin businesses.
He is better off not selling gas and making money fixing cars.
if I’m not mistaken, a guy in Wisconsin(?) tried that. he cut his prices by .03 per gallon for seniors and was ORDERED by shell to raise his price to 9.2% above wholesale, NO discounts available. I believe he also stopped selling gas..
Doesn’t matter if you pay your balance or not, they are still getting their 2-3% per transaction... You are at the end of the day paying a 2-3% premium anywhere you shop that takes credit cards, because they are passing that on to ALL their customers, cash or credit.
He wasn’t ordered by Shell, he was ordered by a state agency.
I stand corrected. the premise, however, stands. he was unable to provide a discount.
That is what I was going to say. Gas can be a “loss leader” to get people to come inside and buy some high-priced convenience goods.
Are they an oil company franchisee, or are they a convenience store chain? I’m pretty sure Shell doesn’t want Shell stations offering a reason for their customers not to use their Shell cards.
You don't pay your bill to MasterCard (or Visa)--you pay your bank. MC and Visa make their money via the per transaction fees the merchant pays.
BTW--I don't know about Visa, but MC is a non-profit company.
A Chevron station in Sunnyvale has started to do that. Last time I checked they were $3.44 and offering 9c/gallon discount for cash, which put them at $3.35, only 2c above the very lowest price (Arco) in the area. That's the only station I've seen though.
I believe they are Phillips 66. The only name I can remember off the top of my head right now is "U-Gas". But they are primarily a gas station.
Must be a lot of gas station owners violating their franchise agreements. I see 3-5 cent per gallon discounts for cash/diesel all the time. Wal-Mart also offers 3 cent per gallon discount if you use their card.
I noticed that at my local station, cigarette prices jumped recently, so their margins on fuel must really be getting squeezed. (unfortunately, they also switched from Marathon to Citgo, so I can’t buy my fuel there now anyway).
Supply isn't simply a function of how much crude is pumped from the ground.
Distributors intentionally keep their inventories lower coming into the Springtime...this has the desired effect as demand rises. Capitalism works.
If it’s 2-3% of the total amount, the banks or someone is getting more if the price of gas goes up. I know it costs all of us if an establishment takes credit cards, no matter if I use a card or not. My point about not feeling guilty is just about me. I hate carrying a balance or paying even one cent in fees. Everyone who does subsidizes me.
You’ll have gasoline for only so long as someone is willing to sell it. This is how they make their living, it is not a hobby.
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Worth repeating. I use a local station that is a few cents more per gallon than the convenience store stations exactly because I want him to be there and operating on snow days, or when I need to have my tires checked, etc.
In my campaign to ‘force’ big media to tell us news we can use instead of propaganda, I want to know how many American refineries have suffered ‘accidents’ requiring unanticipated shutdowns in the past year. We are fed certain news items ad nauseam and other news items are totally ignored. I am suspicious of refinery accidents during this time of war. How many young mosque-going muslims work in refineries? My inquiring mind wants to know.
I also want to know how many Americans are aware that we have to import gasoline. We do not refine enough for our daily use. Talk about outsourcing! That is more serious than outsourcing the manufacturing of TVs or shoes.
Actually, it was the State of Wisconsin itself that ordered the guy to raise his prices, not Shell.
Well, I guess I stand corrected. Thankfully.
They get a flat rate on all gas sales, regardless if people don’t use their MC on a transaction and pay with cash? WTF?? Why would a station owner agree to that? You’d never see that kind of deal at a restaurant, clothing store or anywhere.
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