Pretend I go to the local Speedway and pay $1.96 for one gallon of gas.
About how much did Speedway pay for that gallon? How much profit did they probably make?
According to the spokeswoman for the petroleum industry interviewed this morning on the NBC Today program, the oil industry makes seven cents profit on every dollar of income.
What this equates in cents per gallon of gasoline in the USA was not offered.
I just heard on NPR that gas stations tend to compete on price more when gas prices rise and therefore make less money. That doesn’t answer your question, but part of the answer seems to be that they make less than they do if you’d paid $1.25.
Also just heard on the radio that stations in Minnesota are legally obligated to sell gas at a minimum of $0.06 /gallon more than they paid for it (a station is getting fined for selling at a price less than that :eek: ).
So, at least in MN, stations get at least 6 cents/gallon. Multiply that by an unknown number of cars times an arbitrarily picked average number of gallons per fillup. From that subtract rent, insurance, salaries, franchise fees, and the answer is…?
I once worked with a guy who had a second job at a gas station. He told me they made about 4 cents a gallon. The real profits come from the candy and soda and coffie and stuff they sell inside.
There was an article in the Los Angeles Times several days ago. It claimed that the typical gas station in California makes two to three cents per gallon no matter how high the price of gas is. Most of their margin comes from sales at the mini-marts attached to the stations. Station owners were complaining that they make less money when the price gets high because people start to conserve.
Haj
I agree with all these numbers. Both of my former bosses have told me that that’s about the profit they get on a gallon of gas. This was probably less than what the corporate franchises (this might be a bad term; I mean a corporation that owns a bunch of stations as a franchisee) were making, since they were independent franchise owners. The profit is in the interior sales and especially the car wash.
Oh, and I should add that even that can overexaggerate the retailer’s profits. Fees can eat up a lot of potential profits if the customer pays by credit card. As a quick example, assume you buy 10 gallons of gas at $2 a gallon, for a total of $20. Assume that the retailer makes a net profit on his gas of 5 cents a gallon, so 50 cents total if you pay with cash or something else that won’t incure a fee (a Chevron credit card at a Chevron station, for example). Now, if you used a credit company such as Visa or Mastercard, they deduct 2% of the total amount as a fee. (I think it is actually calculated and paid at the end of the month, but you can do the theoretical calculation on any transaction.) So the retailer now pays 40 cents in fees on your fill up, making his net profit 10 cents, or just a penny a gallon.
This, from Mondays N.Y. Daily News:
Automobile Club of N.Y., cites the following on an average price per gallon, in N.Y., at $2.26.
Breakdown as follows:
8 cents…N.Y. State excise tax
14.6 cents…State petroleum business tax
19.5 cents…City and State sales tax
18.4 cents…Federal excise tax
$1.655 to the gas station.
IMHO: Sure would be nice if the City, State and Federal taxes were waived for the duration. It’s why the politicians are in hiding…IMHO.
I used to work at a gas station, agree with all the above. Most people don’t realise how little money is actually made from selling gas. The real money comes from the impulse or convenience purchases made from the shop. Gas stations are in the business of selling coke, chips, chocolate bars, milk, and bread. The fuel is used to draw people into the store.
And are you willing to waive road repair, building of new highways, snowplowing, street sweeping, etc. for the duration?
Somehow people always seem to think those come for free. Or even that the gas taxes & vehicle taxes pay for them – they don’t! Here in Minnesota, the gas & vehicle taxes only pay for about 1/3 of the highway costs. The rest is covered by money from general state revenues. That is the biggest transit subsidy by far in our state.
I was the owner of 2 gas stations on the west coast. One Getty and one Amoco.
With the Getty I averaged $0.05 per gallon GROSS profit. The Amoco averaged about $0.04 per gallon.
Both stations were relatively busy and sold between 4000 and 5000 gallons per day. As I’m sure you can figure they grossed about $200.00/day on gas sales. Now figure 1.5 employees per hour, 24 hours/day at between $6.00 and $7.50/hr. And thats not counting the rent, insurance, workers’ comp., maintanence, utilities, etc.
:smack:
Running a gas station is a dirty, thankless, razor thin margin experience. I don’t recomend it to anyone. If you think station operators are getting rich off this price spike you’re mistaken.
According to the Minneapolis Star-Tribune, Minnesota law requires that gas stations charge $.08 more per gallon then they pay for the fuel.
The law, while it seems a bit absurd, is actually intended to prevent companies like Wal-Mart from driving out competition by selling gas below cost.
I’d be suprised if stations where marking up their gas any more then that, especially now.
Can’t give better evidence than PecanSandy, but I will say that when I used to work at a Sunoco (way back in high-school), we averaged about $0.005 to $0.01 profit on each gallon.
That was mainly due to the fact that a no-name station was next door, and could always undercut on price. They got their gas from the cheapest supplier of the day, while we relied on deliveries from the Sunoco truck (of course).
Our station was forced to match their price, because if there was even 1 cent per gallon difference, we’d sell almost nothing. That station undoubtedly made a lot more profit on gas, since they were controlling the price.
A friend of my father’s runs several PetroCan gas station franchises, and is paid (actually, gets to keep out of the gross sales) a fixed amount per litre (2-3 cents IIRC) regardless of the cost per litre to the customer. PetroCan’s costs and profits come out of the remaining after-tax amount. The actual pump price is dictated by PetroCan, and might change several times a day, depending on prices at other stations in the immediate area (there is a subscription service that reports gas prices for his sales area to him and to PetroCan several times daily). He makes most of his profit on the non-gas sales once the gas gets the customer into the place.
While there is lots of room for price gouging at the supply end, the retail end of gas sales seems to be very much market driven with pretty cutthroat competition. The appearance of collusion on prices is due to the very fast reaction at the retail level to price changes by local competitors.
Note that this is secondhand info and may not be correct on the details or applicable to other areas.
I realize most of the places are making the profit off the 1.29 sodas and the 2.00 bag of chips, but I wonder how the little gas station in town is still doing it. All he does is sell gas, full service at that and is only 1 to 2 cents higher than everyone else in town.
If gas stations make most of their profits on the sale of soda pop, candy bars, etc. next to the cash register, what will be the effect of the pay-at-the-pump machines?
Whenever I use one of them, I never go inside, and so am not tempted to buy something from the store. Won’t these machines eventually cut into their profits big-time?
I do see that these machines cut their costs down to almost nothing. All the work is done by the customer, and even the credit card payment is confirmed before they pump the gas. I’ve even seen some gas stations where they had nobody working at night, but the pumps are still on (but only for pay-at-the-pump). That eliminates the employee cost completely!
And I can’t see that pay-at-the-pump would attract many more customers – I look for the cheapest price when I’m buying gas.
Just popping in to add that Oklahoma also requires gas to be marked up by a few cents a gallon. I believe it is for the same reason jweb stated.
It probably allows them to hire a person or two less which lowers their fixed costs and results in cheaper prices.
Haj
So the gasoline station makes between $0.01 and $0.08 profit on the gasoline…what about the gasoline company?
Or to put it another way, what entity does the individual station buy the gasoline from? Their parent owning corporation, or a third party? And what are they making per gallon?
I too have long wondered about pay-at-the-pump services. Since the real money in a gas statioin is in the sodas and candy inside, it always seemed to me that p@p would cut into profits, even if employee costs were reduced. When my kids were smaller, having a p@p service would decide where I stopped for gas, however. If I could go somewhere where I didn’t have to get the kids out of their car seats, carry them into the store, or watch to be sure they didn’t take stuff off the shelves, and then get them back into the car … why, that made all the difference to me.
Around here, the latest rage is for supermarkets to install gas stations out front. Nearly all the chains have them, now. There is usually no convenience store at all, just a little booth for the lonely attendant to take cash payments. There must be some money in it or the stores wouldn’t be installing them.