Record oil-company earnings haven't trickled down to gas stations

BOUNTIFUL — During the first week in May, Doug Olson sold fuel at a loss.

The co-owner of Slim Olson's gas stations in Bountiful and Woods Cross charged customers $4.25 for a gallon of diesel — despite purchasing it from the Chevron USA Inc. refinery in Salt Lake City for $4.27 a gallon.

Regular unleaded was trucked into the station from the refinery for $3.45 a gallon that week. Olson and his brother, the station's co-owner, Keith, priced it at $3.49, for a 4-cent-per-gallon profit, if customers paid cash. But these days, most customers prefer paying with credit cards, and the Olsons lose 2 percent on transaction fees — roughly 7 cents a gallon — which resulted in a loss on regular gas.

"Do the math," Olson said. "Do you want to own a gas station?"

Record-high prices for a barrel of oil — which hit $123.53 Wednesday for a barrel of sweet crude to be delivered in June — are not just hurting drivers. Gas-station owners say they, too, are struggling financially.

At a congressional hearing Wednesday on rising gas prices, the owner of a petroleum distribution company in Texas told the U.S. House Judiciary Committee that rising crude oil prices and stagnant gasoline demand are combining to push some small gas stations into insolvency.

Utah gas-station owners blame credit-card transaction fees, the nature of the gas market, rules specified by oil companies that gas stations have to adhere to if they want to sell their brands, and overall inflationary increases in the price of doing business.

International oil prices influence the price at the pump, because the amount of oil available is largely controlled by the Organization of the Petroleum Exporting Countries, which controls production of oil based on supply targets the organization tries to predict. After a barrel of oil is produced, it has to be refined before it is shipped to gas stations.

But local competition also influences how gas stations set prices. If a gas station owner charges more than the station across the street, the owner could lose customers to the competing station. That's the dilemma at Slim Olson's when they get a new shipment of gas that costs more than the previous shipment.

"Do we raise it and really lose the market?" Doug Olson said. "Or do we lose money and price it a little lower?"

At Slim Olson's — as with most gas stations — profits come from popcorn, Cokes and hot dogs sold at the station's convenience store. Slim Olson's also has a carwash that is a local favorite. Customers who fill up at Slim Olson's get a discount on a carwash.

But some customers are choosing to pay full price for the carwash and fill up at a cheaper station.