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."
Yep, that’s why most place sell snacks and soft drinks as that is the best way to make money off of selling gas.
I feel bad for this guy.
Snacks and soda are ok, but I’ll bet they make more off cigarettes and lottery tickets.
Sounds like the credit card industry is cleaning up.
Now I don’t feel guilty for paying my balance each month.
Sounds like the old “chain store” argument. Independents cannot match economies of scale when selling a commodity product.
So cut the price 15 cents a gallon for cash purchases. Sales will increase, it'll put pressure on MC, and the increased cash sales might have {cough, cough} positive tax benefits.
In order for gas prices to be lower, demand must change as it tends to be inelastic.
Supply must also be increased the left is against this method.
Expect more of the same as the dollar continues to lose value. Lots of small busness will fold.
Cigarettes maybe, but lottery tickets no. The retailer gets 5 cents for every $1.00 ticket sold. Not much of a margin.
Offering discounts for cash purchases violates oil company franchisee agreements and, in some cases, state law.
There’s a small gas station near where I live that has stopped selling gas.
counting scratch offs too? All i ever see anyone buying in the local quickie mart are cigs and scratch offs and lotterty tix. i go for the zig zags.
MC doesn’t work that way. They get a flat rate right off the top. He cuts prices by 15 cents, and MC still gets their cut. He’ll end up losing money even more.
I can’t say for sure for all states, but I know in Texas the retailer gets 5 cents for every $1.00 ticket sold.
Really? There's a chain here in MO that offers a 4 cent/gallon discount if you pay cash. No problems with law or companies as far as I can tell.
If they are cash purchases, Master card doesn’t have anything to do with it.
Funny, Wisconsin state law requires that stations markup gas by 9.18%.
Believe me, they sell gasoline only to bring in folks who buy other retail items. Beer, cigarettes and soda being some of the largest selling items.
When stations stopped offering full service, gas prices came down and the old fashion service stations folded. You can pull into a Jiffy Lube for an oil change or a convenience store for a fill-up, while getting a six-pack on your way home from work.
You're right. I misread the post I was replying to. Sorry about that, Uncledave!
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