By Coy Knobel, Cowboy State Daily
Gasoline retailers don’t have the kind of authority over the price of their product that President Joe Biden recently hinted at, according to a Wyoming gas station owner and others in the industry.
Biden, in what he called a “simple message” to companies selling gasoline to consumers, asked them in a recent Tweet to “Reduce the price you charge at the pump to reflect the cost you pay for the product. And do it now.
But a Wyoming gas station owner and other industry insiders contacted by Cowboy State Daily said lowering gas prices isn’t as simple for retailers as the president seems to believe.
The retailer’s profit on a gallon of gasoline is much closer to 10 cents than $2, as many mistakenly believe.
And everything from global supply and demand to local weather, taxes, credit card fees, regulations, road conditions and more go into determining the price of a gallon of gasoline. , they said.
Many service stations are owned by independent small business owners. Some belong to chains or groups of stores that have come together. Very few are operated by oil companies or refiners, so before they can sell fuel to consumers, the service station must first purchase the fuel itself.
The wholesale price they pay is a factor in the price they ultimately set for people at the pump, according to Mike Bailey, a Riverton councilman who owns and operates eight Pit Stop Travel Center gas stations and convenience stores. .
Bailey, who also owns a bulk fuel distribution company and is chairman of the Wyoming Petroleum Marketers board, said fuel prices are primarily affected by crude oil market conditions and supply and wholesale demand.
“The gas stations you see that are major branded with Conoco, Sinclair, Shell, Phillips, Exxon or others, are most likely contract dealers and they have to buy the fuel they sell from that major brand supplier. “, he wrote. in an email. “It limits their ability to ‘go around’.
“Independent service stations have the ability to purchase fuel on the ‘open market’ from any available supply,” he continued. “It can be a positive or negative thing, depending on market conditions. A multitude of factors contribute to these price changes.
These factors include such matters as the operational status of pipelines and refineries, the individual location of a gas station, and other factors.
“If an area has weather conditions that limit the fuel supply to that area, it causes a shortage that will drive the price up,” Bailey said. “If there is too much fuel in one area, the price will drop to entice buyers to come from further afield to get that cheaper fuel. If a refinery or pipeline suffers a breakdown or incident that prevents it from having fuel, the market will react by raising prices.
“Some regions also have different fuel regulations which can cause supply issues,” he continued. “Some regions are required by the United States (Environmental Protection Agency) or state regulators to use only certain specialty fuels that require a different refining process, which can cause further market disruption. Most gas price changes that you see at the retail level are caused by this change in station fuel cost.”
Taxes also make up a big chunk of what consumers pay for fuel, he said.
“The federal government has a tax of (18.4 cents) on gasoline and (24.4 cents) on diesel. Each state also has its own fuel taxes (Wyoming, for example, has 24 cents per gallon on gasoline and diesel, as opposed to California which has 56.6 cents per gallon on gasoline and 65, 9 on diesel),” Bailey wrote.
There’s no “average” fuel retailer, so all of the costs that go into a gallon of gas vary from station to station, said Jeff Lenard, vice president of strategic initiatives at the industry for the National Association of Convenience Stores, a global trade association for convenience stores. and fuel retailers.
He said contrary to public perception — and perhaps the president’s — pricing flexibility and profit margins for gas station owners are limited.
“An astonishing 45% of drivers believe retailers make at least $2 profit per gallon, according to a NACS consumer survey,” Lenard wrote in a document he sent to Cowboy State Daily. “The average markup on a gallon of gasoline is about 35 cents. After expenses, a retailer makes about a third of that in profit, before taxes… Retail is part of “distribution and marketing” and accounts for 5% of the price. »
He said distribution costs, credit card fees, store operating expenses, inventory fluctuation and other expenses were cutting into retailers’ profits.
“These retail-based expenses…will be higher for some and lower for others…And, of course, net margins still need to be taxed before they become profits,” Lenard wrote. “Ten to 15 cents a gallon isn’t quite $2 a gallon and a path to millions of dollars a year in profits.”
Besides the tweet suggesting that US gasoline retailers could drive down gasoline prices, President Biden has repeatedly called gasoline prices and inflation in general, “Putin’s price hike.” , referring to Russian President Vladimir Putin and his invasion of Ukraine.
Biden also recently sent oil company executives a letter saying their companies share responsibility for the high prices and that they could do more to bring them down.
Critics say it’s the Biden administration’s policies that are holding back domestic oil supply and driving up prices.
A notable critic of the president’s tweet to gas station owners is billionaire Jeff Bezos, CEO of Amazon and owner of The Washington Post.
“Ow. Inflation is far too big an issue for the White House to continue making statements like this,” Bezos tweeted in response to Biden’s message. direct, or from a profound misunderstanding of the basic dynamics of the market.”
The average price for unleaded gasoline in Wyoming on Wednesday was $4.77, down 10 cents from a week ago and up $1.38 from a year ago.
“Gas station operating costs continue to climb,” Bailey wrote. “Labour, utilities, freight, and nearly every other cost of running a store have also increased dramatically. We are all feeling the effects of the pandemic, inflation and very bad energy policies. »