High Prices Force Palmyra, Pa., Gas Station Owner to Calls It Quits
Sep. 2–PAYLMRA–Frank Hoffman no longer can compete in the gas station business.
His family has operated the Hess station along Main Street in Palmyra for 42 years. Yesterday, he closed it. Rising gasoline prices have squeezed him too much.
Many station owners lose money on nearly every gallon of gas they sell. And the more prices increase, the more they lose, particularly on credit-card sales.
Hoffman and other retailers have to pay a fee, usually about 3.5 percent, for each credit-card sale to the card company. Hoffman said he expects a profit of 6 cents per gallon at the self-serve pump, but at $3 a gallon, the fee to the credit-card companies is more than 10 cents a gallon, leading to a net loss on credit sales.
And with prices as high as they are, many people don’t carry enough cash to pay for a tankful of gas.
Jeff Leonard, spokesman for the National Association of Convenience Stores in Alexandria, Va., said retailers “are lucky to lose as little as possible” at their gas pumps.
The higher gas prices go, the smaller the profit margins, because retailers are reluctant to pass on the full wholesale price they pay. And many motorists are inclined to buy gas wherever they can save a penny or two.
According to Leonard, retailers like Sheetz use gasoline sales as a way to get customers to buy food and beverages.
“Gas is a traffic builder,” he said.
For Hoffman, gas was the only thing he was selling. He didn’t have a convenience store at his station. When convenience stores multiplied quickly in the early 1990s, the competition for gas sales started to hurt his business. In 1995, Sheetz opened a store a block away, and “that cut us in half,” he said.
The Hess station was one of the only local gasoline retailers that still offered a full-service pump. Although the profit was bigger, fewer people were choosing the full-service option because of the high price of gas at that pump.
Monica Jones, public relations manager for Sheetz, said the company is paying $3.10 a gallon wholesale for regular gasoline with the latest price increase, and selling it for $3.19 a gallon. Sheetz also has to pay credit-card fees.
“You do the math. It’s not good,” she said. “We don’t like selling gas at $2.99, but we can’t go lower. People aren’t happy, and unfortunately they sometimes take it out on the employees.”
The credit-card fees take a huge bite out of profits, Leonard said. Last year, about 54 percent of all gasoline was purchased with credit cards. This year, it has been more like 70 percent, and with the latest jump, “it’s going to get closer to 100 percent,” he predicted.
Leonard said some gas retailers turn to cigarette sales to curb their losses, and cigarettes account for about a third of all in-store sales at convenience stores.
Hoffman, who lost both his wife and his mother to cancer, said he would not go that route.
Dennis Summers pulled his car into the empty Hess station Thursday, hoping to fill up. He is handicapped and drives from Mount Gretna, 12 miles away, to use the full-service pump.
“I guess I have to learn how to pump gas,” he said.
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