News Column

Record-high Gas Prices Squeeze Business Owners and Consumers

Feb 21, 2013

Whit Richardson

The average price for a gallon of gas in Maine was $3.83 on Wednesday, an increase of 30 cents per gallon in the past month, which is straining the wallets of both gas station owners and consumers.

This week the average cost of gas in the state was a record high for the month of February, according to Gregg Laskoski, a senior petroleum analyst for GasBuddy.com. A year ago, on Feb. 20, 2012, the average price was $3.68 per gallon, according to the website. On Feb. 20, 2011, it was $3.22.

While the gas prices in Maine are high, they're not as bad as elsewhere in the country.

"As disturbing as [a 30-cent increase] may be to folks in your state, it's important to understand in other regions the increase is double what you've seen in the past month in Maine," Laskoski told the Bangor Daily News.

For example, gas in Chicago increased more than 60 cents in the last 30 days, and the average price for a gallon of gas in Los Angeles stands at $4.29 a gallon.

"It's certainly problematic in every part of country," Laskoski said.

Nationally, the average price for a gallon of gas has increased 45 cents in the past month to $3.72 on Wednesday, the fastest rate of increase since 2005, according to The Washington Post.

While high prices at the pump squeeze consumers, forcing many to make tough budget decisions, businesses also are affected.

Gas stations make very little money on gas, according to Sarah Wardwell, owner of Union Street Citgo in Bangor.

On Wednesday, Wardwell's station was selling gas for $3.82 per gallon.

"If we're lucky, we'll make 10 cents" on every gallon, she said.

However, that's only if someone pays with cash. If someone uses a credit card, the profit shrinks. If someone uses a Mastercard or Visa, which charge businesses a flat fee plus a percentage of the purchase every time someone uses their card, that shaves about 8 cents off that 10-cent profit, Wardwell said, leaving her with 2 cents for every gallon of gas she sells.

And since the credit card fee is based in part on a percentage of the sale (it's about 3 percent on average), as the price of gas increases, so do those fees, she said.

An independent gas station owner in Fort Kent said the increasing cost has the potential to seriously affect his business.

"What it means if it keeps up, it means this will put us right out of business," he said. "Distributors are squeezing the dealers out of here. There's no profit in gas, and I'm dead serious about it."

The gas station owner, who declined to give his name for fear of becoming a target of the large distributors, said after deducting credit card fees, he makes next to nothing on the gas.

"Someone along the way are making big bucks," he said, adding that it's certainly not the gas stations.

The increase also puts pressure on Maine businesses that rely on fleets of vehicles.

Mark Chamberland, president of R.F. Chamberland in St. Agatha, which has a fleet of 45 trucks that crisscross the eastern United States, said the increase in gas prices isn't "deadly" to the company, but it does have an impact.

"It's not harder to do business, but your profit margins are lower, which means you can't spend that money in the community," Chamberland said.

Diesel fuel, which Chamberland said was $4.55 a gallon in Madawaska on Tuesday evening, is the company's largest expense, making up about 39 percent of total costs. That's an increase from just four years ago, when gas was only 25 percent of the company's expenses, Chamberland said.

While the increase in gas and diesel prices during this time of year isn't surprising, it has turned out to be more pronounced, according to Laskoski with GasBuddy.com. There's usually a jump in price around now as refineries transition between producing two different types of gas, a winter blend and a summer blend. The transition requires some reduction in output. East Coast refineries were operating at 75.9 percent capacity on Feb. 13, he said.

But a combination of additional factors, including tightening supply, the high price of crude oil driven higher by speculation in the market as a result of the strength of the Dow Jones, has made the increase more severe recently.

Crude oil did post its biggest daily fall of the year on Wednesday, Reuters reported.

There's also another factor that gets less attention, Laskoski said.

"There's an underlying current here that's also working against consumers and that's the weakness of the U.S. dollar," he said. "Our own federal government favors a weak dollar. The logic behind it is, in doing so -- by favoring a weak dollar -- they can help reduce the relative values of the $16 trillion in debt that we carry. But the flip side of that coin is when you support a weak dollar it's extremely detrimental to consumers. It takes more of those dollars to buy that crude oil and for consumers to buy the finished product -- the gas at the pump."

But global commodities markets and monetary policy aren't Wardwell's primary focus. She's just interested in keeping her business going.

"We're all trying to keep the prices as low as we possibly can," she said. "It's just as hard on us as it is on consumers."

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Distributed by MCT Information Services



Source: (c) 2013 Bangor Daily News (Bangor, Maine)


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