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January 12, 2009

Local station operators no fan of high gas prices

By GARY KAUFFMAN

When gas prices go up, no one hates it more than the owners of the local stations.

Not only do they deal with more unhappy customers, they also see their profits from gas sales shrink.

“The higher it goes up the less we get because of the credit card fees,” said Rita Reitmeier, owner of the Marathon stations in Millersburg and Nappanee. “The margin crosses to where we actually lose money.”

The reason is simple: Stores make a fixed rate per gallon, while credit cards charge a percentage of the total sale.

Using a store-brand credit card — a Marathon card at a Marathon station or a Shell card at a Shell station — usually only requires a nominal fee from the store.

But when stores take a national card, like Visa or Discover, they have to pay a transaction fee, typically in the 2.5 percent range per transaction.

If it is assumed a station receives 5 cents per gallon — it varies from week to week and is set by the distributor — buying 10 gallons of gas would result in a 50 cent profit, regardless of the price on the pump.

If the gas is $1 per gallon and a national credit card is used, the resulting $10 sale would create a fee of 25 cents, leaving the station owner with a profit of 25 cents.

But if the price goes to $1.50 per gallon, the station owner still receives the 50 cents on 10 gallons but the cost is now $15, resulting in a credit card fee of 37.5 cents. The owner is left with a profit of 12.5 cents.

If the price pushes to $2, the transaction fee on the $20 sale is 50 cents, leaving the owner at a break-even point.

When prices went above $3.50 per gallon last summer, Ron Freeman, president of Pak-A-Sak/Jay Petroleum, said credit card fees created major losses for stores. Many small retailers folded.

As a result, most stations today are also convenience stores. In fact, many use gasoline as a way to bring people to their stores.

“I can make more money on a can of pop and a candy bar,” Reitmeier said, “than I can on $20 of gas.”

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