No Windfall for Retailers
Posted on: Wednesday, 3 August 2005, 15:01 CDT
Aug. 3--PROVIDENCE -- With the price of gasoline near an all-time high, one might think gas station owners are reaping a windfall.
But the retailers say the opposite is true.
As gas prices go up, their profits usually shrink -- and sometimes disappear altogether.
"A lot of people come in here and they see $2.35 a gallon," said Kenny Duva, who owns Duva's Station Inc. on Mount Pleasant Avenue. "They think it's all yours."
What customers don't understand, he said, is that his station makes less money when gas is high. Sometimes, Duva said, he loses money on each gallon of gas he sells.
"A lot of guys are struggling, and an awful lot of us are hoping that prices come down a little bit soon," said Paul O'Connell, executive director of the New England Service Station & Automotive Repair Association, based in Billerica, Mass.
Gasoline prices did decline this week, but they still remain near record highs. The average price for a gallon of self-serve gas in Rhode Island dropped 2 cents a gallon on Monday, the first decline since late May. A survey of area gasoline stations by the state Energy Office found an average price of $2.399 a gallon, compared with $2.419 last week.
A similar survey by AAA Southern New England found an average price of $2.409 a gallon, a penny higher than the state's survey.
Gasoline is 45 cents a gallon more expensive than it was a year ago. (When adjusting for inflation, gasoline was more expensive in 1981.)
The average price of home heating oil on Monday was $2.289 a gallon, unchanged from the previous week.
There are many reasons why high prices hurt gas station owners, O'Connell said. They include more drive-off thefts; increased use of credit cards, which eats into profits; and bigger finance charges to cover the higher up-front costs of buying gasoline from distributors.
Duva said that high prices have been a big drain on his business, which has been in the family for more than 50 years.
His father, Vinnie Duva, bought the station in 1949. For years, his dad advertised that his prices were 3 cents lower than his competitors. People would drive for miles to buy gas, he said.
In the station office, a yellow photograph shows Vinnie standing proudly in a garage bay. Gasoline was selling for 19 cents a gallon, taxes included.
Duva's no longer boasts having the lowest prices in town. At $2.359 a gallon at the full-serve station last week, the price was higher than some self-serve stations. Still, the price was 4 cents lower than the state's self-serve average, and 18 cents lower than the full-serve average.
Duva started working at his father's station in 1970, when he was 15. Now, he owns it.
Even with today's high prices, the number of cars that drive into the station -- about 200 a day -- remains steady. But drivers are buying less gasoline.
"Nobody's filling up any more," Duva said.
And many customers are favoring credit cards over cash, he said, which erodes profit margins.
For example, Duva said that a couple of weeks ago, his retail price was $2.35 a gallon, 4 cents higher than his wholesale cost. The 3-percent credit-card processing fee he has to pay amounted to 7 cents a gallon. He lost 3 cents a gallon on every credit-card purchase, he said.
Other days his markup is higher. One day last week, the station was making 14 cents a gallon. "It doesn't last that long," Duva said.
He said he is still able to eke out a living, mainly because his overhead is relatively low. The station is fully paid for. Duva said he draws a salary of about $700 a week, before taxes. He lives in a duplex, also paid for. He is divorced and his children are grown.
Duva starts work at the station, across the street from Mount Pleasant High School, at 5 a.m. He works until 6 p.m. on the five days each week the station is open.
He has one employee: his father, Vinnie, now 82. Though Vinnie is retired, he still pumps gas at the station. He doesn't draw a salary.
He and his dad both like talking to the customers, Kenny Duva said.
"When you're outside talking to the customers, you're having fun listening to everyone's stories," Kenny Duva said.
"Thank God my dad's helping me," Kenny Duva said.
He said he doesn't know how he'll manage when his dad no longer works at the station.
-----
To see more of the The Providence Journal, or to subscribe to the newspaper, go to http://www.projo.com.
Copyright (c) 2005, The Providence Journal, R.I.
Distributed by Knight Ridder/Tribune Business News.
For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.
Source: Providence Journal
Related Articles
 |
 |
User Comments (0)
RSS Feeds