Stations pocketing year's biggest profits

State's gasoline retailers cash in 
Stations pocketing year's biggest profits

http://www.azcentral.com/news/articles/1101gasprices01.html

Ken Alltucker
The Arizona Republic
Nov. 1, 2005 12:00 AM 

Arizona gasoline retailers are taking in their largest profits of the
year, with station owners collecting nearly 35 cents for every gallon
sold. 

The gross profit margin, which is about three times the retailers'
typical profit of 12.5 cents per gallon in the region, reflects the
current wide spread between what retailers are paying for gasoline
from their wholesale sources and what they are charging their
customers. 

Station owners in the Phoenix-Mesa area last week took an average
profit of 33 cents per gallon, according to figures provided by AAA
Arizona. advertisement  
  
 


"Nobody wants to be the first guy to start lowering prices if they
don't have to," said AAA spokesman David Cowley, who tracks Valley
gasoline prices. "The comedown is when they make their money."

As wholesale prices drop, station owners tend to pass along those
savings to motorists at a snail's pace.

Industry representatives maintain that there is nothing sinister
about collecting the larger profits. Gasoline retailers, particularly
independently owned stations not affiliated with major oil companies,
depend on the spread between wholesale and retail prices to make
money.

The average Phoenix-area price of $2.66 per gallon on Monday
represented a 15 percent drop from an all-time high of $3.14 per
gallon on Sept. 7. 

Here and across the nation, stations affiliated with big oil
companies as well as independent retailers are enjoying the retail
price drops because wholesale prices have dropped much quicker.

Statistics provided by the Energy Department show wholesale gasoline
prices in Los Angeles have plummeted 25 percent since the end of
September. Cowley said Arizona gas retailers last week paid an
average pretax price of $2.03 per gallon at the Phoenix tank farm. 

Ironically, station owners were making slimmer profits while enduring
harsh criticism in the days after the Gulf Coast hurricanes disrupted
the nation's energy supplies and sent prices hurtling beyond $3 per
gallon in early September. 

At the time, industry representatives were called to testify before
Arizona lawmakers, and others were ordered to hand over detailed
pricing information as part of a gas-price investigation pressed by
Attorney General Terry Goddard. 

But talk of price gouging has simmered as retail prices have dropped
sharply. 

Industry representatives view the situation differently.

"At any given time during the month, a retailer may be losing money
or making money," said Arizona Petroleum Marketers Association
Executive Director Andrea Martincic, whose group includes 150 members
who own and operate 480 service stations and provide fuel for an
additional 400 stations. "You have to balance it out over time."

Cowley said many station owners likely were making little to no
profit in the week after Hurricane Katrina hammered Gulf Coast
refineries. 

Station owners say they need to pass along the price at a slower pace
in order to recoup profits lost earlier in the year. 

Despite the hefty margins that retailers have enjoyed in recent
weeks, the industry this year has yet to reach the profit level of
past years. Cowley said that the typical Arizona station so far this
year has collected an average profit of 11.66 cents per gallon of
gasoline. That is slightly below the average of 12.5 cents over the
past three years, according to AAA. 

New Jersey-based Oil Price Information Service provides area gasoline
price data to AAA based on daily surveys of about 600 Valley
retailers. 

Looking at the bigger picture, gasoline retailers get a small part of
the overall price charged. Oil companies that produce and refine
crude oil into gasoline usually collect 3 out of every 4 cents spent
for a gallon of gasoline. 

As reflected by corporate earnings released a week ago, oil companies
such as Exxon Mobil Corp., Royal Dutch Shell, BP, Chevron and
ConocoPhillips are reaping tens of billions of dollars in profits.
Exxon Mobil Corp. alone took in a third-quarter profit of $9.9
billion, its most profitable quarter ever. 

Other elements that make up the cost of gasoline include Arizona's
18-cent tax per gallon plus profits for retailers, distributors and
pipeline operators.

Cowley said the high profit levels mean that motorists should see
falling gasoline prices in the weeks ahead.

"At some point, prices have to continue to come down," Cowley said.
"This is the best they've (retailers) seen it in awhile."



Reach the reporter at ken.alltucker@xxxxxxxxxxxxxxxxxxx or (602)
444-8285.







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