SHERMAN, Texas-- A sign advertising gasoline for only $3 a gallon—almost a dollar less than at nearby gas stations—lures drivers into an Exxon station in a busy commercial strip in Sherman, Texas, a prosperous town north of Dallas. But when they pull in, they find the station's doors chained shut and its pumps dead. It is one of the many stations across the country that have gone out of business recently, all victims of gasoline prices that have soared almost 40% in the past year, reported The Wall Street Journal.
Far from profiting from climbing gasoline prices, station operators [image-nocss] are finding that their costs are jumping even as gasoline sales are sagging. And so gas stations are being shuttered at an accelerating clip, said the report.
Still, the state of the market doesn't bode well for anyone trying to exit the gasoline retailing business, be they one-store owners or energy giant Exxon Mobil Corp., the report said. Last month, the company said it plans to sell its 2,220 stations in the U.S.; other oil companies already have shed most of theirs.
The shrinking number of gas stations is also bad news for drivers, reducing both convenience and competition, which could lead to even higher gasoline prices. "It's terrible for consumers," Judy Dugan, research director at advocacy group Consumer Watchdog, told the newspaper.
The number of gas stations has been declining for years. In the 1990s, regulations requiring expensive improvements to underground storage tanks put many retailers out of business. Growing competition from big-box stores and supermarkets wiped out many others.
Still, owning a gas station remained a relatively easy option for beginner entrepreneurs because it required little upfront cash while still offering a fairly good chance of making a profit, said the report. But rapidly rising gasoline prices are throwing the equation off balance. Selling gasoline now requires big cash flows and established credit lines. Higher gasoline prices also compound the fees that station operators must pay to credit-card companies, because the fees are calculated as a percentage of sales.
Meanwhile, the profit margin on gasoline sales has plunged. In the week that ended June 30, the difference between what retailers paid for gasoline and what they got from selling it was about 15 cents a gallon on average, down from 21 cents a gallon around this time last year, according to national data cited by the Journal compiled by Oil Price Information Service and Wright Express.
Aziz Hassan, who owns five stations in Sherman, knows all about the profit squeeze. A truckload of gasoline costs $35,000, compared with $10,000 just a few years ago, he told the Journal. Most of his profits are going to credit-card fees, he said, which eat up about nine cents of every gallon of gasoline his customers buy with a credit card. This leaves him little to cover costs such as electricity to run the pumps.
Hassan is holding on to the business he grew over 25 years—but he has to work seven days a week, 17 hours a day to make ends meet. "I'm hanging in there and hoping for the better," he said.
Bill Douglass, CEO of Sherman-based Douglass Distributing Co., which supplies 150 gas stations in north Texas, estimates about 10% of his clients have gone out of business, and a few have turned their stations over to him because they cannot pay their outstanding bills, he told the paper.
Despite the recent closures, drivers in Sherman still have many options, including a Wal-Mart that is selling gasoline for 11 cents a gallon less than a neighboring gas station.
William Kosti, a real-estate broker trying to sell the closed Exxon station and two others nearby, told the paper that the stations' operators decided to close because they were running through their own savings to keep the businesses afloat. He is recommending that buyers stop trying to run standalone gas stations. Add a restaurant or a liquor store, he suggested.Photo by drummerjoe.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.