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Gasoline Prices and the Consumer: Perceptions and Realities
The consumer has had many questions in these days of rising gas prices. The National Association of Convenience Stores (NACS) has published its 2007 Gas Price Kit to address questions by the consumer about gasoline prices and to help the media, legislators and the general public to better understand our industry.
To read the report in its entirety, Download the Full 2007 Gas Price Kit (in PDF format, 1.26 MB). Here are some of the more common perceptions we hear of in our industry every day:
Perception: The major oil companies dominate retail gasoline sales.
Reality: The majority of convenience stores are owned and operated by the independent businesses or single-station owners.
- Less than 3% on the 112,000 convenience stores selling gasoline are owned and operated by major oil companies.
- 52% are owned and operated by independent business owners who sign a supply contract and sell gasoline under a brand owned or controlled by a refining company.
- 43% are owned and operated by independent business owners that do not sell gasoline under a brand owned or controlled by a refining company.
Perception: While 14% of the consumers polled thought that the gas station owner makes up to a dollar per gallon in profits, the majority polled said that it would be fair if there was a profit of 6 cents per gallon.
Reality: In addition to the wholesale price of gasoline, the retailer must also consider these costs and expenses:
- Taxes - average of 46 cents per gallon.
- Transportation fees - 1-3 cents per gallon, depending on the distance.
- Credit card fees - approximately 2.5 percent of the transaction.
- Retail overhead - employee wages, rent, electricity, depreciation, and other costs of doing business.
- Retailer net profit - this varies from day-to-day and can range from negative numbers to several cents per gallon. NACS estimates that the average retailer had a net pretax profit of between 1 and 4 cents in 2005, and about one cent in 2006.
Perception: When the prices go up, the gas station retailer's profits go up, too.
Reality: C-store retailers dislike higher gasoline prices as much as their customers do, as margins decrease while costs, particularly credit card fees, increase. There are many reasons why the wholesale cost of gas goes up and one of the most common is a shortage of supply. Retailers will have to pay a premium in order to maintain their supply, usually 25-50 cents per gallon. In addition to the higher cost for the product, credit card fees increase and higher octane and store sales decrease.
Gasoline Myths & Facts: Have you ever wondered if the price would really go down if everyone boycotted purchasing gas for a day? Are you afraid to answer your cell phone while you are pumping gas for fear that your car will explode?
Please visit the following website for the answers to these and other interesting questions: