By JACK PALMER
palmer@crescent-news.com
Many Americans believe that everyone involved in the gas industry is making big bucks from the surge in gas prices.
That's a myth, according to Mike Nolan of Mike's in Defiance and Bryan.
"Some people come in here and ask if I'm making $1 gallon," he stated. "If we were making $1 a gallon, there would be a gas station on every corner."
Nolan said his average profit ranged from 8-14 cents per gallon over the last five years.
"That's gross profit," he quickly added. "That's before employee wages, utilities, pump maintenance, repairs and insurance -- which continue to increase as well."
Add in credit card fees and Ohio's commercial activity tax (CAT), and it's easy to envision why so many retailers are struggling despite gas prices being at all-time highs.
Credit and debit card processing fees (which go to credit card companies and financial institutions) now rank as the second-biggest expense for gas station operators, according to the National Association of Convenience Stores.
"I pay 2.2 percent, so on $4 per gallon that's 9 cents a gallon I pay for credit card processing," said Nolan. "With the rising cost of gas and more high-dollar transactions (at the pump), my credit card costs are only going up."
Lynn Bergman, president of Ney Oil Co., acknowledged that a profit range for gas retailers of 5-15 cents per gallon "is about right." But like Nolan, he was quick to point out that those figures do not include wages and other costs.
"Sixty to 65 percent of our retail customers pay by credit card, so that's a significant cost," said Bergman, whose company operates six stations and sells gasoline to more than 20 more in northwest Ohio.
His pet peeve, however, is the pyramiding aspect of the CAT tax.
"At a little more than $4 per gallon, we are paying the state about one penny per gallon in CAT tax," he stated. "That may not seem like much, but our supplier is also paying because it's a tax on gross receipts from business activities. CAT is often paid on three or four levels for the same gas."
As an independent marketer, Ney Oil Co. does not operate any pipelines or terminals, unlike larger oil companies.
"The Speedway outlets are owned by Marathon, which has its own refinery. In that case, they may only have to pay the CAT tax once. Tell me what's fair about that."
Being refreshingly candid, Nolan called gas retailers "a dumb industry."
"We don't sell our product according to what we pay for it. We sell it according to what the competition is charging," he said. "If I buy gas at $3.95, I want to sell it for $4.099. But if the guy down the street is charging $3.999, that's what I have to sell it for. If I'm as little as 2 cents over that, I lose 30 percent of my retail business."
So if retailers are struggling to make money on $4 per gallon of gas, who is?
The short, but possibly misleading, answer is the oil companies. Last year the five largest -- Exxon Mobil Corp., Shell Oil Co., BP America Inc., Chevron Corp. and ConocoPhillips -- earned a combined $123 billion last year.
"Everybody talks about the windfall profits oil companies are making, but if it were such a good investment why aren't their stock prices any higher?" asked Bergman. "Even for those large companies, the percentage of profit is low compared to many other industries."
The cost of crude oil now accounts for about 73 percent of the gasoline pump price, according to the U.S. Department of Energy. Crude oil prices are currently at record highs due mainly to high worldwide oil demand relative to supply -- the world pumps 85 billion barrels of oil out of the ground each day while it wants to consume 87 billion barrels.
Large developing nations such as India and China, but also Brazil and eastern European countries, are growing rapidly, pushing long-term demand even higher.
"Our company has been able to get all the gas we want, but sometimes it takes a lot of work," said Bergman. "We're not in danger of running out, but gas isn't as plentiful as people think."
"So far, supply hasn't been an issue," said Nolan. "There may be different times where a supplier has put a certain store on allocation, but that hasn't happened here."
Other contributing factors for the high cost of gasoline at the pump include conflicts and political unrest in some major oil-producing regions and the falling value of the U.S. dollar.
"I think the public is becoming better educated," said Bergman. "I don't hear as many ridiculous comments about how much money we must be making from high gas prices.
"On the other hand, driving to work for people is an issue. This is a big deal to them. They don't like paying high gas prices and I don't blame them."