Posts Tagged Price gouging
Excuse my logic but this post aims to dispel some of the myths concerning gas stations.
For starters it is a prevailing belief among many consumers that individual filling stations “price gouge” and are making huge profits. The reality of this is that the big profits are made at the wholesale level. In other words, the big oil companies are reaping tremendous profits – hitting all time high levels as you read this. I have spoken to several independent gas station owners and they claim that the average retail station makes anywhere from $.10 to $.18 per gallon profit, which given today’s retail prices translates into between 2 and 6 percent.
In fact, many gas stations in recent years have found it absolutely necessary to add convenience stores at their facility. This is not a measure of greed where the owner is just trying to make more and more money. It is a matter of survival. How can a business make only 5 or 6 percent profit on gas and cover all the overhead, salaries, property taxes, etc.?
Another misconception which I admittedly believed myself is that the 9/10 of a cent that appears at the end of per gallon prices at most stations is a cheap ploy to make you think you are getting a good deal. In other words, and I believed this, the thinking goes that gas stations use the 9/10 of a cent ploy to make a typical consumer thinks that he’s getting a good deal if he pays $3.999 per gallon versus $4.00. I’ve been told by a friend of mine that this practice started long before today’s ballooning gas prices. Back in the days when gas cost pennies on the gallon this 9/10 of a cent was a big savings and the practice has just been kept as kind of a time honored tradition.
Some cynical people also believe that some gas stations are guilty of selling “watered down” gas. This is virtually impossible. Water is heavier than gas so if it were mixed with gas it would sink straight to the bottom of the gas stations underground tank. Furthermore, since almost all stations never pump gas from all the way at the bottom of the tank, they would never reach that dreaded water.
Many people also believe gas prices aren’t regulated enough. I don’t know all the ins and outs of this claim however I have been told that ironically enough there are regulations in place for preventing stations from pricing their gas too LOW. That’s right. I said regulators want to make sure stations don’t sell their gas below cost! “Why would anyone do that?” you may ask. Large gas station chains could theoretically afford to sell gas at a break even level for long periods of time in order to undercut the independents who would be forced to go out of business. Then the large chains would jack their prices back up and have succeeded in eliminating their smaller pesky competitors.
The last myth I get a chuckle out of concerns the reasoning behind gas attendants almost never collecting the money until they have removed the nozzle from your tank and replaced it at the pump. I always thought it was to guarantee that the attendant doesn’t mistakenly ask you to pay twice. The real reason is that they are afraid that if you pay before the filling is complete you may drive off with the nozzle still in your gas tank, thereby ripping the hose from the pump and dragging it down the road with you. As my one friend who owns a gas station remarked, “Hey, those hoses cost a lot to replace.”
Copyright 2012; Greg S.