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."
Distributors intentionally keep their inventories lower coming into the Springtime...this has the desired effect as demand rises. Capitalism works.In the case of this article, capitalism = fewer retail outlets for your product...got it.
Actually, since pay at the pump became widespread, many people don’t bother to go in and buy impulse type items anymore, especially moms with kids in carseats.
Please see Post #20. I misread your post and was corrected.
So go blame the EPA, Congress and all envirocritters.
Read a good economics textbook too - oligopolies and monopolies can only be sustained by government laws restricting entry into a field.
Discounts for cash instead of credit card violates their terms of service with the credit card processor. That’s why some stations will only accept debit cards or cash, since the swiped debit card fee with a PIN can be a flat rate rather than a percentage, or a considerably lower percentage than credit card.
In many states, the socialsts will put you in jail for that. Why do you think Exxon stopped doing cash pricing?
In the case of this article, those retailers who refuse to adapt will perish. Many a gas retailer sells more than gas and auto repairs in order to make money.
Springtime = reformulated gas. Hard to stock up if the spring mix isn't being produced yet.
Very good point! Taking credit cards seems to be a lose lose situation.
Odd the JS left out what their sister TV Station WTMJ reported. He only stopped selling his gas FDR 24 hours as a protest or so they reported at 8 AM this morning. Also just repeated at 9:28 am
That is the station in Mequon and then they are also running a clip about cheating at the pumps
http://www.todaystmj4.com/news/local/7658557.html
Could be, but I know of at least a dozen gas stations in my area that offer discounts for cash and have been doing it for years. I pay more attention to diesel since I drive a diesel, but the discounts are offered on both fuels. I know of a few FBO's that offer cash discounts on avgas, too.
Consumers can also adjust demand accordingly.
Ops I just noticed this station is located in Brookfield while the one I mentioned is in mequon so if I caused any confusion.
That's true. Merchants cannot set minimum prices for credit card transactions without violating the terms of their agreement with the credit card company.
Pay $3.44/gallon and sell it at $3.44/gallon; going to take a lot of volume.
It is a little bit of a semantics issue. Per Mastercard:
“Surcharging credit card transactions is strictly prohibited by the card associations,* MasterCard® , and Visa® . A merchant may, however, offer discounts for cash transactions provided it is clearly disclosed to cardholders as a cash discount and the cash price is presented as a discount from the standard price available for all other means of payment.
“*MasterCard® modified its regulations to allow the IRS to assess a 2% convenience fee. No other industries were part of that modification. Visa® is not part of the IRS program and has no exceptions to surcharge prohibition.”
It is time for merchants to give a discount to customers who pay cash. Otherwise, they should stop whining about credit card companies.
I don’t know how it is where you live but in CA the ARCO stations where I trade take cash and charge you fifty cents to accept credit cards. Not too many independents left where I live in Southern Cali...
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