With current gas prices averaging well over three dollars a gallon and oil companies recording record profits you’d think that the owners of all those gas stations would be laughing their way to the bank.
You’d be wrong…
It seems that if gasoline was the only thing the station owners sold the project margins are currently so slim that many of them would be forced out of business. In fact, if you pay for your fill up using a credit card, some stores might actually be losing money on the sale.
You might be scratching your head on that one but here’s the nuts and bolts of how it works. On average, station owners pocket anywhere between ten to fifteen cents on any gallon of gas that they sell. You’d think that as gas prices increase, those numbers would go up. Enter the evil credit card companies. They charge the station owners about 2.5 % of all purchases. You can do the math but when gas was around two bucks a gallon the station owners were ponying up a nickel or so per gallon to the credit card companies. When gas hits three bucks a gallon, that number jumps to seven and a half cents. If they, the station owners, are only pocketing between ten and fifteen cents a gallon to begin with then half of that profit is going right out the door to the credit card companies. In other words, it’s a win/win situation for the banks.
In order to make up for this more and more of these stop and go stations are relying on the old one-stop shopping theory and are offering their customers much more than petrol.
Need a loaf of bread, some eggs and a gallon of milk? Hey, how about some chips and dips and a couple of beers to wash it down with? Or maybe just a cup of coffee and a donut to help see you on your way. It seems the markup on these and other assorted sundry items is where the station owners realize most of their bottom line. As a matter of fact, a national survey of independent station owners (which represent around 95% of all gas stations across the country) recently determined that while gas represents about 70% of a stations revenue it accounts for only about 30% of its profits. In turn, all those goodies that I mentioned earlier are often marked up by around fifty to sixty percent from your neighborhood grocery store or stop and rob like 7/11.
So, what does that mean?
It means next time you drive past your local Sunoco or ExxonMobil station and see their name on the marquee, keep in mind that it’s not really them who own it. They’re just the one who get to call the shots. The names of the company themselves are just being licensed to an independent owner who has to pay them fees on a regular basis just to stay in business. More importantly, they also have to buy the gas itself from the guys whose name is on the label.
Did you ever wonder why when you’re driving down the road you see different gas prices at different stations even though the name of the station is the same?
Well, wonder no more. Since big oil can set the prices that the station owners must pay they can charge them differently based upon their location or maybe even more importantly, the location of their competition. In order to make up for those price differentials, guess who the station owners pass that charge down to?
That means the station owners can’t shop around for the best deal and big oil knows it.
So next time you want to bitch and moan to the guy or gal sitting behind the Plexiglas about how much it takes to fill up your gas guzzler try and think twice about it. The gas itself ain’t what’s making them rich.
If you really want to see them smile, take a deep breath and load up on some junk food, magazines or one of those impulse buy items. That’s what’s putting food on their tables.