Gas Prices Rise to Average $3.72

PHOTO: Demonstrators take part in a pray vigil for lower gasoline price in front of a service station in Washington, DC, February 23, 2012.
Share
Copy

The latest gasoline price survey, released today by the U.S. Energy Information Administration, finds that the average paid by U.S. drivers for a gallon of regular nationwide is $3.72.

Just over the past week, prices rose 13 cents, and the average price per gallon is 19 cents more than it was two weeks ago, according to the Department of Energy. This is the highest price recorded in February, though gas prices were about this high in April last year. The DOE publishes average gasoline statistics dating back to 1990.

The reasons for the recent increases, says Andrew Lipow, president of Lipow Oil Associates in Houston, include, first, the price of crude, which is rising due to worsening tensions with Iran. Iran also has reduced crude sales to Europe.

There also have been supply disruptions in Nigeria and the Sudan. And refining capacity in both Europe and the U.S. has been reduced by the closures of refineries.

Exceptionally high gas prices in San Diego, for example, have been the result of refinery outages on the West Coast, Lipow said, including one caused by a fire at BP's Cherry Point facility in the Pacific Northwest.

With gas prices continuing to climb, you might think now would be a great time to own a service station. Yet, impossible as it might sound, some stations are going out of business. Direct Gas in Goffstown, N.H., for example, closed last week, according to the Manchester Union Leader.

Wouldn't you think station owners would be dragging home big sacks of money?

"I wish," says Jay Ricker, who runs 50 stations in the Indianapolis area. As prices at the pump rise, he says, station owners, in order to compete with one another, are passing less and less of the increase along to customers. The result is that the already small margins are shrinking further. Only service station owners with the deepest pockets manage to survive.

Asked what advice he'd offer to somebody thinking of going into the retail gas business today, he says, "You'd better be good friends with your banker."

Ricker replenishes his gas inventory daily. "My cost per gallon, as of this morning," he tells ABC News, "was $3.63, including freight and tax. We're selling it for $3.67, so we're making just three cents a gallon." Even that slim margin, though, disappears when drivers pay by credit card, thanks to processing fees. "If they pay by credit card, I'm losing money right away," Ricker says.

When prices fall, consumers are less sensitive to price, and stations can charge relatively more, thereby replenishing their losses.

The business is toughest now, say experts, for the nation's dwindling number of full-service station. Direct Gas was a full-service station. Owner John Sylvain told the Union Leader that rising prices made it impossible for him to stay in business. Full-service stations typically have higher overhead than self-service.

"Self-service rules," says Jeff Lenard, a spokesman for the Association of Convenience Stores, whose members sell about 80 percent of the gas U.S. consumers buy. Stations in Oregon and New Jersey, he says, are 100 percent full-service by law. But everywhere else around the country, full-service is in decline. "People have become just that much more price-sensitive. Of the customers we survey, 60 to 70 percent say price is their most important consideration."

Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...