Do Gas Station Owners Get Rich from the Surge in Gas Prices?

Many gas consumers are under the impression that everyone related to the gas industry, must be getting rich from the huge surge in gas prices. Annual reports from some of the big gas producers show astronomical profits. How do these gas prices affect the individual gas station owners? Who is getting rich?

In my AC Article "Yes Mr Bush, I Agree We Aren't in a Recession", AC's content producer, Aly Adair, left a comment that planted the seeds for this interview. She said," Why do we rent? Because we lost our business and home when our gasoline distributor filed bankruptcy. Did the government or our Mortgage lender offer to bail us out? NO! "

Aly, how long did you own the gas station? Was this a family run business?

My husband and I owned a small, neighbourhood convenience store/gas station for six years. We leased a portion of our property to a major gasoline distributor that owned/operated the gasoline business and paid us a commission on the gasoline sales.

How large a population is the city your gas station was situated in?

The rural city itself had a population of around 7,000 people. However, our location drew traffic from a much larger tourism demographic because we were located within one mile of 3 popular golf courses, two popular State parks, and a major highway connecting Austin, Texas with Houston, Texas. We were also at the entrance of a growing subdivision, so we got a lot of commercial diesel fuel business from Austin-based construction companies, utility company fleet vehicles, and out-of-town realtors.

Were other gas station owners in your area forced out of business too?

Yes. In our rural area, several of the convenience stores were family owned. Our gasoline distributor had leases with around 350 stores across 14 states. Many of the small business owners who used this gasoline distributor were either forced to sell or shut down the retail gasoline operation at their store.

Where you and your family making a decent living from this venture? Were you raking in huge personal profits from you business like many people believe?

We made a decent living from the food service and inside sales portion of our store, but we only made around $.05 a gallon commission on the gasoline sales. That commission revenue, while it seems like pure profit, was reduced by the electric costs we paid to light the gasoline area at night. We had no control over setting the retail prices of our gasoline prior to the gasoline distributor filing for bankruptcy. The distributor called us each day and told us what to set the prices at for that day.

Was there a large initial investment involved in owning your own gas station?

We wrote a five-year business plan and secured an SBA loan for $250,000 to purchase the business. Prior to buying the business, we did one year of research to support the business decision. Ironically, during this feasibility research process, the state gasoline regulatory agency confirmed that this gasoline distributor was so solvent that they were self-insured with the state. They had been in business for 30 years. What this means is, the gasoline distributor had such a good record of operation in the gasoline business that the state did not require them to purchase any liability insurance in the event of environmental accidents. That was pretty impressive not only to us, but also to the SBA and the commercial loan officer who approved the financing for the business.

What percentage of these huge profit's the oil companies are making, did you as an individual gas station owner, receive?

After our gasoline distributor filed bankruptcy, and we were forced to become independent gasoline operators, we made around $.03 per gallon net profit on our gasoline sales. Our net profit on gasoline sales was lower than average because our volume was small, so our cost of gasoline was higher. It typically cost us around $15,000 per week to fill our 3 underground fuel tanks. Some larger retail gasoline operators can make as much as $.10 per gallon net profit depending on their volume of sales.

What other misconceptions does the general public have about individual gas station owners?

What most consumers do not realize is that store owners must comply with rules and regulations for selling gasoline not only from state regulatory agencies, but also the large companies that brand their gasoline operation. Our gas brand was Fina and that company had many rules we had to follow in order to have their name on our sign. Those rules and regulations cost the store owner a lot of money that eats away their profits. Another thing consumers don't realize are the number of accidents at the gasoline pumps that cause the store owner money. It was typical for us to have at least 2 or 3 people per month who drove off with the gasoline nozzle still in their gas tank of their car. Each time that happened, it cost us around $200 to fix the break-away nozzle and hose, and clean up the spilled fuel. Another major problem that store owners have is gasoline theft. Even with modern computer-operated pumps, you still have theft by consumers and employees.

What major company was providing the gas that was delivered to your distributor?

Gasoline distributors can have contracts to distribute multiple brands of gasoline on certain days of the week. Our distributor carried Fina, Exxon, and some others.

How was your distributor driven out of business? How many stations were affected by their bankruptcy?

Our distributor went bankrupt due to some greedy top management executives who stole money from the company. The bankruptcy affected 350 stores across 14 states.

Why were you unable to find another distributor?

It took us four months to find another distributor because the bankrupt distributor still owned the tanks and all the equipment. The bankruptcy courts who handled their bankruptcy ordered them to pump all their gasoline out of the tanks at the 350 stores. The gasoline was considered an asset in the their bankruptcy. Then, the new distributor required that all of our tanks be tested for leaking and required us to be in compliance with all other state regulatory requirements, permitting, and delivery certificates before they could deliver gasoline into someone else's tanks.

How long were you able to keep your home, after the business went under?

We were able to keep our home for about three years after becoming independent gasoline operators. As with any business, when you have one part of the business that drops off, you try new strategies to subsidize the lost profits. The problem we had was their bankruptcy stayed in the courts for over three years. We sued because they broke their 5-year lease contract with us. Our legal fees kept mounting up. We could not upgrade the gas equipment because we didn't own it. The equipment was not worth enough for the courts to justify the gasoline distributor to remove it from our property. Basically, the courts ruled that the distributor should abandon the worthless stuff to our ownership. It would have cost us $20,000 to have it removed from our property.

Where did you apply for help in order to keep from losing your business? What did they say to you when you came to them?

Six months prior to knowing we would go under if we didn't get help, we contacted both the mortgage lender and the SBA. We were told that because our loan was more than two years old, they could not adjust our payments or apply for a refinance package. We put the store and the house up for sale, but did not make any profit on either because in 2006, the foreclosure problem had already started. The value of our home dropped because of the flood of foreclosure properties already on the market. Our home lender wanted us to short sell to avoid foreclosure, but that was not an option for us because we were backed by the VA. By the grace of God, we were able to sell both properties before foreclosure, but we made no money to pay the debts from the failing business.

What are you and your husband doing now to earn a living, after losing your business? How tough are things for you now?

My husband went back to work as a mechanical designer and makes enough to pay our living expenses. My background prior to owning the store was in educational publishing. Despite the fact that I have an MBA, I have been unable to find gainful employment because I have been out of the industry for too long. Another problem that needs to be addressed by Congress is that employers can now review your credit report during the hiring process. Even when you have an MBA, most companies don't want to hire you if your credit report sucks from a failed business.

How has it affected your immediate family, emotionally and psychologically?

It has been two years since we lost all of our stuff. We actually bartered our antique furniture, appliances and household stuff in exchange for our realtor and movers to fix up our house and sell it for us. For the first six months, you believe life has completely ended. You get depressed, you fear that there is no future, you feel bad because you failed, and you don't want to hear about other people's successes. But, after that, you pick yourself up, look at all the people who have it worse than you do and count your blessings. I think of the people who lost everything in Hurricane Katrina and still have nothing three years later. I then consider myself lucky.

What cutbacks and losses affected you directly, besides the loss of your home?

We ended up having to file bankruptcy ourselves after losing our home and business. We will be in Chapter 13 for five years to pay back our debts. That means no extra money for vacations, no Christmas or birthday celebrations, no savings accounts, no new computer, or no new furniture. It means you only buy what the IRS says you need to survive and not anything you want.

Did you see an increase, or decrease in customers once gas prices began to rise drastically, or did the numbers remain at the same levels?

We definitely saw a decrease in gasoline consumption and revenues as people traded for smaller cars or changed from using premium fuel to regular fuel.

It is somewhat ironic that you live in one of the oil producing states, which is also home to our current president. What reactions do you see and hear around you, in relation to that fact?

There is substantial evidence that the Bush family is tied to big oil and President Bush was once in the oil business himself. Many people believe big oil is the reason we entered the Iraq war. From my experience in the gasoline business, I know for a fact that the store owners and the gasoline distributors are not the ones profiting from high fuel prices.

What do you feel about the huge oil reserves, held back by the government?

I support a certain amount of oil reserves for use in military defence, natural disaster relief, and emergency preparedness efforts. The problem with the huge amounts of oil reserves is that America does not have the refining capacity to convert those oil reserves into usable fuels.

If you had a chance to speak directly to President Bush, and to the other politicians and people of influence in our government, face to face, regarding the gas situation and the economy, what would you say to them?

Gas situation: Continue to invest in the development of alternative fuels; invest in more oil refining capability; open up drilling in Alaska to lessen our dependence on foreign oil.

Economy: End the war in Iraq; change laws for how credit card companies screw consumers; prohibit employers from checking credit reports; get rid of the IRS code that penalizes the middle class; quit sending American jobs overseas; create incentives for imports/exports that keep American dollars in America; quit raising interest rates to prevent inflation when we are in a recession!

Give American small business owners the same tax breaks that are given to foreign owners of American businesses. Small business owners are taxed, permitted, licensed, and certificated beyond what is reasonable to stay in business. Lessen the 40% tax rate that is charged to self-employed or contract employees.

Thank you for the interview, Aly.