Gas station owners like low gas prices too
As a worker pumps gas, a sign displays that regular is $2.29-a-gallon, Friday, Dec. 12, 2014, in Neptune, N.J. Motorists are now seeing prices under $3 a gallon for the first time in four years, which also means that gas stations are paying less for the fuel, too. (AP Photo/Mel Evans)
In this Thursday, Dec. 11, 2014 photo, Chanel Acosta, of Hialeah, Fla., pumps gas into her car at a RaceTrac gasoline station in Hialeah. Motorists are now seeing prices under $3 a gallon for the first time in four years, which also means that gas stations are paying less for the fuel, too. (AP Photo/Wilfredo Lee)
Low gas prices are shown at a RaceTrac gasoline station, Thursday, Dec. 11, 2014, in Hialeah, Fla. Motorists are now seeing prices under $3 a gallon for the first time in four years, which also means that gas stations are paying less for the fuel, too. (AP Photo/Wilfredo Lee)
Eduardo Palacios-Paez, of Miami, pumps gas at a RaceTrac gasoline station, Thursday, Dec. 11, 2014, in Hialeah, Fla. Motorists are now seeing prices under $3 a gallon for the first time in four years, which also means that gas stations are paying less for the fuel, too. (AP Photo/Wilfredo Lee)
In this Thursday, Dec. 11, 2014 photo, low gas prices are shown at a RaceTrac gasoline station, in Hialeah, Fla. Motorists are now seeing prices under $3 a gallon for the first time in four years, which also means that gas stations are paying less for the fuel, too. (AP Photo/Wilfredo Lee)
OGDEN — Consumers aren’t the only ones who are enjoying a gasoline price tag that’s under $3 a gallon for the first time in four years.
Gas stations like the low prices too, and not just because customers are nicer when they are paying less.
“Overall, during the last couple of months, there’s been a little bigger margin of profitability,” said Jerry Priest, who independently owns the Tesoro gas station at 2686 N. U.S. 89 in Pleasant View. “Generally speaking, with gas prices falling a little bit, people do a little more discretionary spending.”
That means profits for Priest and the nation’s 127,000 filling stations are rising, which local gas stations say is a good thing with the winter slow season just beginning.
Before they sell gas to you, station owners buy gas on the wholesale market. When the wholesale price of gasoline falls quickly the difference between the cost of wholesale gasoline (including taxes) and the price at the pump gets wider, boosting profits for stations. The steeper the drop, the better.
“It’s completely antithetical to what people believe,” says Tom Kloza, chief oil analyst at the Oil Price Information Service.
That difference has stretched to 21.7 cents per gallon this year, the highest ever, according to an OPIS analysis of 16,000 U.S. stations. That compares to an average of 17.1 cents over the last five years. On a percentage basis, station profitability is at its highest since 2005. And profits on diesel sales are even higher. “They are off the charts,” Kloza says.
Yes, that means you could be paying even less for gasoline than you are.
But before you cry foul, you should know that after all the ups and downs in a year, gas stations do not make much money from selling gasoline. After credit card fees and other operating costs, net profit for gasoline sales averages 3 cents a gallon, according the National Association of Convenience Stores.
When gas prices soar, and drivers think they’re being gouged, stations are barely scraping by or even losing money. When the wholesale price is soaring, like it did in 2008, 2011 and 2012, station owners can’t increase the price at the pump as fast as their costs are going up or they risk losing customers to competitors.
The impact goes doubly for independent stores, like Priest’s.
“It can be hard when you’re competing against all of the big chains and corporations,” he said. “And now, just as you talk about people having discretionary funds, we’re heading into our really slow season (winter) and Christmas is coming, so that will be a spending priority for people.”
But when the wholesale price is going down, like now, there isn’t the same pressure to lower the price.
Drivers are so happy to see lower prices they don’t search all over town for the lowest one. And then when they put gas in the tank, they fill ‘er up instead of just putting in a few dollars’ worth.
And drivers have some money left over to spend on what’s really profitable for station owners: The drinks and snacks inside.
“Common sense tells you that when people save some money at the pump, they’ll be more willing to come in and buy something inside,” said Jason Miller, who along with nine others stores along the Wasatch Front, owns the Exxon station at 1750 W. 2700 North in Farr West. “I just filled up my truck the other day and saved $15, so that tells me people are going to have a little extra money. But because the prices dropped so fast, it might take another month or two to really figure out the impact.”
Linda Powers, manager at Hoagies Corner, 2705 N. 2000 West, Farr West, said business at the 30-year-old gas station usually remains relatively static.
“We have a lot of loyal customers,” she said, explaining the store’s steadiness.
The national average price of gasoline has fallen 78 days in a row to $2.60 a gallon. That’s 65 cents less than last year at this time and $1.10 below its peak for this year of $3.70, reached in April.
Gas has fallen because the global price of crude oil has dropped 45 percent since this summer. The U.S., Canada and other countries are producing more oil at a time when world demand is weak because of sluggish economic growth.
This has drained profits and knocked down the share prices of oil producers, the exploration and production divisions of the big oil companies such as Exxon Mobil and Chevron, and companies such as ConocoPhillips and Marathon Oil.
Contact reporter Mitch Shaw at 801-625-4233 or mishaw@standard.net. Follow him on Twitter at @mitchshaw23.
The Associated Press contributed to this report.
