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Pain at the Pump: Dealers' Gripe: Don't Blame Us, Say Station Owners Squeezed By Tight Profit Margins

Posted on: Thursday, 27 April 2006, 15:00 CDT

By Jim Wasserman, The Sacramento Bee, Calif.

Apr. 27--Sacramento-area gasoline dealers have three words for customers riled over gasoline prices that have rolled past $3 a gallon and turned consumers into a snarling mass: Don't blame us.

As area pump prices reach a record $3.05 per gallon for regular unleaded and even drivers of small vehicles are spending nearly $30 to fill up, gas station owners and managers say they're only passing on prices that oil companies are passing onto them.

From Florin Road in south Sacramento to El Dorado Hills and Roseville, customers are cursing and complaining to the nearest person they can find - and that's often the clerk behind the cash register. At many stations with their pumping islands standing above a trio of 12,000-gallon underground tanks, they're also buying less while groaning about paying more.

"People complaining, always complaining," said Sunny Hira, owner of Hira's Petroleum in Roseville.

"Of course. Aren't you?" growled Sid Zarakani, manager of Northgate Valero in Natomas, when asked if customers are griping.

Hira, Zarakani and others who run the estimated 1,000 gasoline stations in Sacramento, Yolo, Placer and El Dorado counties say they get only a few pennies per gallon and operate on profit margins so slim that's its their minimarts filled with doughnuts, cigarettes and beer that generate the real money. They say these conditions are part of larger changes in the oil and gasoline business that have squeezed dealer profit margins even as pump prices rise and oil company profits grow.

"How it's affecting the dealers? It's killing us," said Dennis DeCota, executive director of a gasoline station trade group, the California Service Station and Auto Repair Association.

DeCota says six major corporations control 94 percent of gasoline sold in California.

"You'd starve to death if all you had was gasoline," said Glen Cox, owner of Glen Cox Chevron in midtown Sacramento. "You couldn't even keep the doors open. We have a convenience store and a carwash. It all helps."

While such talk offers little comfort to commuters and delivery drivers pouring small fortunes into their tanks, the dealers' take is one of the tiniest financial slivers in the price of a gallon of gasoline, according to California Energy Commission statistics.

As an example, consider gas priced at $3.07 a gallon. The commission officially pegs dealer costs and profits at 1 cent of that gallon compared to 58 cents for taxes, 78 cents for refinery costs and profits and $1.70 for the cost of crude oil made into gasoline.

But dealers interviewed in recent days say their margin actually is a little higher: 6 to 7 cents at El Dorado Hills 76; 5 to 10 cents at Florin Shell; 5 to 7 cents at Hira's Petroleum; and 12 to 15 cents at Glen Cox Chevron. It all goes to paying their rent, credit card fees and workers' compensation costs, among other expenses.

"Even if you pump 200,000 gallons, 6 cents a gallon is $12,000. That doesn't pay the rent," Zarakani said.

In a four-county metro area with more than 1.9 million registered cars, trucks and motorcycles, according to the California Department of Motor Vehicles, 200,000 gallons represents one month's business at Zarakani's station. Across the region, fleets of tanker trucks that carry up to 9,000 gallons of fuel typically arrive every other day at stations. It's part of a finely tuned choreography directed by computers that know at any given moment how much fuel a station has on hand and what it likely will need in the days ahead.

"Every other day we get 7,000 to 8,000 gallons of regular and 1,000 to 2,000 gallons of premium," said Charlotte Smith, manager of El Dorado Hills 76.

Dealers pay in varying ways, sometimes in advance for the fuel that arrives or within a few days of its unloading. But they all pay a volatile price that gives the gasoline station business a fluidity like few others.

The rapidly rising prices that customers can see almost immediately after a tanker's arrival reflect the higher price the dealer paid for that load, they say. In a complicated business where deliveries come from oil companies or distributors called "jobbers," that's called the dealer tank wagon price.

"We are the ones who get hurt," said Sam Singh, who owns Florin Shell and four other area stations with his family. "We paid $30,000 in the beginning (for a 9,000 gallon load) and people get mad at us."

"I have to raise the price (Wednesday) because we got a load (Tuesday) at the new price," said Cox of Cox Chevron.

"The prices change anytime the oil company wishes it to," said Zarakani of Northgate Valero.

Some such as Hira, who sells Beacon gasoline, claim a little more flexibility. Hira says he pegs his price to that of a nearby competitor.

"I watch the Arco gas station across the street. When they change, I change it," he said.

Drivers have largely lost one safety valve that provided some comfort in the past. The power of independent stations that sell "unbranded" products at cheaper prices has greatly eroded, said DeCota of the service stations association.

Oil companies used to unload excess supply without the fancy additives to those dealers who could then discount it, he said. But as supplies tighten, unbranded stations now often find themselves at the end of the line and paying higher prices than their branded competitors, DeCota said.

In the meantime, owners and managers are grateful for magazines, bottles of aspirin, soft drinks and snacks.

"We have a minimart," said El Dorado Hills 76's Smith. "That's what makes the profit."

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Copyright (c) 2006, The Sacramento Bee, Calif.

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Source: The Sacramento Bee

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