Katrina: Independent Gas Stations Expect Losses
While gas prices nearing $4 a gallon have people charging “price gouging,” the vast bulk of gas stations are actually losing money, according to an AP report.
Drivers aren’t the only ones feeling the pain of high pump prices and scattered fuel shortages. Independent gas stations are, too. The stations, which rely on traffic from people filling up their tanks to drive sales in their stores, on Sunday were still counting their losses, which one industry group expected to be significant in the wake of Hurricane Katrina.
The bulk of the nation’s 167,000 retail outlets that sell gasoline, including some that carry the names of big oil companies, are independently owned and operated. They rely on store sales to generate profits and generally only receive pennies on the dollar from gas sales, which are meant to drive traffic into their stores. “This is a hundreds of billions of dollars industry, with the majority of profit coming from in-store sales,” said John Eichberger of the National Association of Convenience Stores, which represents companies that operate 70,000 outlets nationwide that sell gasoline. “A lot of retailers have lost money.” Eichberger said it was too early to give an estimate of the losses, but he predicted it would be “significant.”
The hurricane damaged gas pipelines and refineries along the Gulf Coast and caused some supply and production disruptions. Panicked buying by motorists also has contributed to shortages at some stations in the South, along the East Coast and in the Midwest.
In Illinois, officials were trying to keep more gas stations from closing by relaxing some rules related to posting of prices, and station managers were trying to keep from losing more money by clamping down on gas theft.
The state’s Department of Agriculture said gas stations with older pumps that are incapable of computing and displaying prices higher than $2.99 a gallon will be allowed to temporarily post half-gallon prices. “The alternative would be to shut those gas stations down until they were in compliance,” said Agriculture Director Chuck Hartke.
Jeff Napolilli, a cashier at the Westown Shell in Carbondale, Ill., said the fear of people stealing gas has caused his station to require customers to pay in advance.
In Tallahassee, Fla., many Circle K gas stations were completely out of gas Sunday and had been for several days. At a BP station that did have gas, the price stood at $3.38 a gallon for regular on Sunday. Not all stations were hurting, though. Maurice Marcellus, a 23-year-old store clerk, said the rising prices haven’t slowed store sales at the BP station where he works. “People still have to go to work,” he said. “How are you going to go to work without gas?”
Eichberger of the National Association of Convenience Stores encouraged people to be patient, saying it will take time for stations to rebuild gas inventories and for pump prices to come down. “The person that has to pay $3 a gallon isn’t happy,” he said. “The person who has to charge $3 a gallon isn’t happy, either. So, nobody is happy right now.”
Kim and I paid $71 and change to fill up the tank with premium yesterday, with prices at $3.75.9 per gallon. It seems inconceivable that the station, which presumably got the gas before Katrina shut down any refineries, isn’t getting a windfall from the radical price hike. On the other hand, stations can’t make any money without gasoline. And customers hurting from paying that much for gas may be a bit more reluctant to enter the store to buy overpriced groceries.