Big oil profits don't trickle down to stores

That’s not the case for convenience store owners.

While ConocoPhillips reports on its Web site that profits for major oil companies reached $43.3 billion in the first half of 2005, up 42 percent from 2004, one of its customers, Rob Wilson of Rapid Roberts, said his gas profits are down. Wilson declined to disclose by how much, but the 23-year convenience-store veteran said profits per gallon at his 24 area stores are only about 1 percent.

Wilson said he profited about 7 cents per gallon five to 10 years ago but only 3 cents a gallon now.

“The oil companies have had another record year,” Wilson said. “The retailers are the ones that get the brunt of the (customer) complaints, and we fight the battles on the front lines.”

Wilson said he’s “shocked” and “astounded” at the profit estimates he’s heard for oil companies.

“(Consumers) see all these profits on the 6 o’clock news that large oil companies are making, and they associate anybody that sells gas as making these record profits,” he said. “I think they get frustrated.”

Wilson said this year – which saw a preliminarily estimated national price average of $2.27 per gallon, according to Jeff Lenard, communication director for the National Association of Convenience Stores – was particularly tough and volatile.

Wilson said gas retailers are facing growing competition and are extremely sensitive to market price changes.

“Gosh,” Wilson said, “who else puts 2-foot numbers up to post their price on the street?”

Bread and butter

Lenard broke down the $2.27 price of a gallon of gas this way: Pumping crude oil cost $1.18, refining cost 44.4 cents, distribution cost 19.9 cents and taxes cost 44.9 cents.

The average price per gallon has risen 59 percent from what Lenard said it was in 2000, $1.43.

But Lenard said gas really isn’t the bread and butter for a convenience store. Inside sales on items such as cigarettes, candy and soda account for just 30 percent of sales but 70 percent of profits.

“You can make more money on anything inside the store than you can a fill-up,” he said. “You’re seeing very few stores that can survive on gas alone.”

High gas prices, though, are hurting inside sales, too, as consumers pinch their pennies.

Lenard also said consumers are paying with credit cards at the pump and skipping trips inside the store.

He said the rise in credit card use is cutting into convenience store margins because credit card companies charge transaction fees. He said about 70 percent of customers paid with a credit card at the pump in 2005, up from 54 percent in 2004.

Hypermarket competition

Additionally, Lenard said competition is stiffer, not just from an increase in convenience stores but also an increase in nontraditional competitors.

He said the number of convenience stores grew nationally from 119,800 stores in 2000 (1 store per 2,349 people) to 138,200 in 2004 (1 per 2,100 people).

He also said “hypermarkets” like Wal-Mart are competing with convenience stores by selling gas at some locations and that more than half of the nation’s grocery stores under development include fuel pumps.

“You have all these nontraditional fuel retailers entering the fuel business,” said Lenard, adding that nontraditional retailers still account for less than 10 percent of the fuel-selling market.

Convenience stores nationally posted $394 billion in sales in 2004 with $262 billion coming from motor fuels sales, according to the NACS Web site.

Perhaps a combination of these trends factored into Morris Oil Co.’s recent closure of Village Mart, a south Springfield Phillips 66 fuel station and convenience store. There were three gas stations in competition at the Plainview and Campbell intersection. Owner Jim D. Morris declined to comment for this story.

To avoid closing, convenience stores are exploring new products such as upscale coffee, pizza, rotisserie chicken and fresh-made sandwiches.

“They really are forced to reinvent themselves (to compete),” Lenard said.

Rapid Roberts’ Wilson said southwest Missouri consumers have been lucky, even with gas prices steadily at more than $2 per gallon.

“I would like them to know how fortunate we are to have as low a price as we do here,” he said. “I think people either don’t realize that or really don’t appreciate that.”

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