Aces High Bulletin Board
General Forums => The O' Club => Topic started by: wrongwayric on June 13, 2008, 07:03:56 AM
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They are closing/selling over 2000 company owned gas stations because they are not profitable. :huh $4 a gallon gas and they can not make a buck? Something stinks with this story.
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They are closing/selling over 2000 company owned gas stations because they are not profitable. :huh $4 a gallon gas and they can not make a buck? Something stinks with this story.
Actually, higher gas prices can easily result in less bottom line profit for a "gas station". The reality in this business is that the gas pumps only serve to get customers onto your property. You then make your profit from sales of other things - in your food/convenience store or service bays primarily. Company owned locations don't tend to do well with their food/convenience items (dedicated food/convenience chains that also have gas beat them out handily) and company-owned serfvice bays have been losing market share for many many years vs dedicated service providers. So, with more pressure on consumers due to higher gas prices, they are more discriminating in terms of "bargain shopping". Gas companies don't undercut the competition on gas price per their distribution agreements so unless their stores offer some sort of added value customers tend to go to their competition.
Valero wised up some time ago and upgraded their stores to compete with the food/convenience chains, hence why they are doing well. Exxon simply has dropped the ball in that regard.
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I think most of those stations pay to use the name... Anyway seems like a smart move if gas continues to rise and consumers become more frustrated with the prices I wouldn't want my name associated with it.
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They are closing/selling over 2000 company owned gas stations because they are not profitable. :huh $4 a gallon gas and they can not make a buck? Something stinks with this story.
I'm a stockholder. we are not seeing massive dividends...... the money is being made by speculators.
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$4 a gallon gas and they can not make a buck? Something stinks with this story.
Of the$4, the vast majority goes to pay for crude oil (about $3.10). Nearly 50c goes to state and federal government in direct taxes. That leaves about 40 - 50c to pay the refiners, transport companies and retailers, with the bulk of that going in refinery costs.
Producing crude oil is a very profitable business at the moment. Converting crude oil in to gasoline and selling it to customers is not very profitable.
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Actually, higher gas prices can easily result in less bottom line profit for a "gas station". The reality in this business is that the gas pumps only serve to get customers onto your property. You then make your profit from sales of other things - in your food/convenience store or service bays primarily. Company owned locations don't tend to do well with their food/convenience items (dedicated food/convenience chains that also have gas beat them out handily) and company-owned serfvice bays have been losing market share for many many years vs dedicated service providers. So, with more pressure on consumers due to higher gas prices, they are more discriminating in terms of "bargain shopping". Gas companies don't undercut the competition on gas price per their distribution agreements so unless their stores offer some sort of added value customers tend to go to their competition.
Valero wised up some time ago and upgraded their stores to compete with the food/convenience chains, hence why they are doing well. Exxon simply has dropped the ball in that regard.
Yep. Even if they have large format c-stores with a range of ancillary profit centers like carwash the "majors" (major integrated oil companies -- the "brands") find retail to not be profitable enough, since company operations tend to be less efficient than dedicated retailer/marketer competitors and less profitable by far than upstream exploration and production. Worth more trouble than it returns, generally.
There have been cycles of direct involvement at retail among the majors over the past 80 years or so and retail is definitely not a priority today. Will that change again down the road, perhaps. However, even at its more recent peaks, the percentage of company ops has been fairly small with most stations owned and supplied by independent retailers and marketers.
As for profits, net retail margin on a gallon of $4 gas is about 3 cents, give or take a few cents here or there depending upon market conditions. And give or take could be 1 cent, breaking even or losing money here or there for a few days in high volatility markets. If the station owner is really "gouging" he might get a dime. But it's hard to gouge, since it's the only industry that posts the price of its major volume product in huge letters on the street corner for all to comparison shop.
The credit card companies usually make more on a gallon of gas than the station owners.
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Update. These same businesses, or at least the ones they are keeping open, will now no longer take any credit card other than from their company. The reason given is that outside credit cards charge them a fee to take the card, thus cutting into their profits.
I miss the old Standard gas stations. They'd pump your gas, wash your windshield, check your oil and the air in your tires, then happily take your credit card. Ahhh the good old days when service was just as important as making a buck.
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Actually, higher gas prices can easily result in less bottom line profit for a "gas station". The reality in this business is that the gas pumps only serve to get customers onto your property. You then make your profit from sales of other things - in your food/convenience store or service bays primarily. Company owned locations don't tend to do well with their food/convenience items (dedicated food/convenience chains that also have gas beat them out handily) and company-owned serfvice bays have been losing market share for many many years vs dedicated service providers. So, with more pressure on consumers due to higher gas prices, they are more discriminating in terms of "bargain shopping". Gas companies don't undercut the competition on gas price per their distribution agreements so unless their stores offer some sort of added value customers tend to go to their competition.
Valero wised up some time ago and upgraded their stores to compete with the food/convenience chains, hence why they are doing well. Exxon simply has dropped the ball in that regard.
Gas companies only make about 4 cents per gallon.... Rest is taxes and what not...
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Never was that much profit in gas for a station owner.
Other services and items for sale is where most of the profit comes from.
Without them you are peeing in the wind.
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10 years from now we'll be looking back to the good ole days of $4/gallon gasoline.
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Update. These same businesses, or at least the ones they are keeping open, will now no longer take any credit card other than from their company. The reason given is that outside credit cards charge them a fee to take the card, thus cutting into their profits.
The credit card companies make more on a tank of gas than the station owner. It is the highest, or perhaps second highest cost of doing business. It can not only eat up most of the limited profit potential but all or more of that profit. The industry operates on a flat cents per gallon basis and the credit card companies chage a percentage on sale, so the more a tankful of gas costs the more they make and the less the station owner makes.
Since the credit associations have a monopoly position and share the same banks on each others boards there is no mechanism to have a competitive merchant fee structure. This is currently being decided in both Congress and the Courts.
Charon
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Gas companies only make about 4 cents per gallon.... Rest is taxes and what not...
This is true. The sad thing is that you never hear politicians advocating reducing the amount of taxes the gov takes in on gas. Instead we have politicians wanting to take in MORE taxes by taxing the oil companies themselves!