Independent gas stations feeling the pain of rising pricesby Jessica Mador, Minnesota Public Radio
High gas prices could keep many would-be vacationers home this Fourth of July weekend. A new survey from AAA shows more and more drivers are traveling for shorter periods of time and staying closer to home as a way to save money.
But drivers aren't the only ones hurting. Despite record high prices at the pump, independent gas station owners are also feeling the pinch. Part of the problem is that many consumers are now using credit cards to buy gas.
Minneapolis, Minn. — Steve Williams is getting frustrated. He owns Bobby & Steve's Auto World with his dad, who started the business more than 50 years ago. Williams says record high gas prices are making it tougher than ever to survive.
"This is the lowest ever that we have experienced. Our margins and our profitability of the stores are the smallest ever," Williams said.
Despite operating eight locations, Wiliams says sales are down dramatically. And he's not alone. His phone is literally ringing off the hook with calls from station owners trying to convince Bobby & Steve's to buy them out.
"Bobby and I are getting phone calls daily for stores that are for sale, because all the convenience stores are experiencing the same squeeze," Williams said. "They are not making any money and they are finding out that I better get out of this thing, because I'm not making any money and the place is for sale."
Williams says after he pays wholesalers for his gasoline, he's got to pay the credit card companies their share. For him, that's about 2 percent of each transaction at the pump.
After paying the credit card company, he typically is left with just 2 cents gross profit per gallon. And that, he says, doesn't even begin to cover his costs.
"That's happened several times in the last six months where my cost is higher. Imagine a situation like that where now you have to pay your credit card fees and the maintenance of the pumps and everything," he said. "We are really losing in those situations. We are experiencing far more times where we are selling to you cheaper than our actual cost."
Williams says he can't raise prices high enough to cover his costs, because he wouldn't stay competitive. Instead, he tries to lure customers into the convenience store or auto repair shop where they might spend some hard cash.
But the convenience of paying with a card is just too good to pass up, especially now when it costs so much to fill up.
Driver Jim Aubrecht says he rarely pays with cash these days.
"The easiest way to do it is the credit. You don't have to go inside and mess with anybody," Aubrecht said. "It's quicker, and you can wash your windshield while it's filling, and you are on your way."
Aubrecht says he pays close attention to gas prices and shops around for a deal. But like many drivers these days, he's not filling up anymore. Instead, he tries to save money by buying just half a tank at a time for his gas-guzzling stretch Lincoln.
But Brad Proctor, founder of GasPriceWatch.com, says you can't blame people for wanting to pay at the pump.
"What are they doing? They are pulling their credit card out, because they are filling their car up for $75 who carries $75 in cash," asked Proctor. "That just doesn't happen anymore, so more and more people are using credit cards, and it's just devastating these small independents out there."
The credit trend is growing.
Steve Williams says at least three-quarters of his customers pay at the pump with cards. That's up sharply from five years ago when only 40 percent paid with cards. On top of high credit card fees, he says that also causes him to miss out on money he could be making on drinks, coffee or newspapers inside the store.
The worst part, he says, is that many of his customers blame him for the high gas prices. Drive-offs are up sharply, as they are at many stations across the state. Williams says he's planning on beefing up security at his gas pumps.
Two bills have been introduced on Capitol Hill that would allow stations to renegotiate the fees they pay to credit card companies. It's unclear when action could be taken on either the House or the Senate bill.
In the meantime, Williams says he'll do whatever it takes to stay afloat.
"We have got to do something. We are not going to sit idly by. We are going to move differently as the profitability of the gas stream in our business is just one stream," Williams said "and if that somehow diminishes, we have to concentrate on what we do right on the service side, the store side or the food side."
He is hoping his industry will also find new ways to adapt to this new world of high prices and economic uncertainty.
- Morning Edition, 06/30/2008, 7:40 a.m.