Despite gas prices rising over the past weeks, retail gas stations are seeing their margins decrease, putting a strain on such businesses.
The national average price of regular gas, as of Oct. 5, was $3.831 per gallon, up $0.26 from the previous day, $0.66 from a week back, and $0.45 a month ago, according to
data from American Automobile Association (AAA). In contrast, profit margins of gas stations have gone down.
“OPIS MarginPro shows retail gas margins are ~18cts/gal nationwide. That’s down 17cts/gal in a week; 25cts/gal in a mo.; and 54cts/gal lower than end 1Q 2022. When one considers operating costs (labor, credit card fees, etc.), many stores are under water,” noted Tom Kloza, an expert on North American fuel markets, a
tweet. on Oct. 4.
In 2021, the gross margin on gasoline was $0.309 per gallon, or 10.2 percent of the $3.03 per gallon average price, according to global trade association
NACS. In the previous five years, retail gross margins on gas averaged $0.272 per gallon, which comes to 10.7 percent of the gas price.
An analysis of weekly rolling average profit margin of 30,000 U.S. gas stations published at
Fortune found that they only make a net profit of around $0.03–0.07 per gallon after factoring in costs such as labor, credit card transaction fees, insurance, and utilities.
The net profit of gas stations comes to less than 2 percent, which is very low when compared to other high-profit industries like the banking sector, which is estimated to net around 30 percent margins.
Blaming Gas Stations and Companies, Strategic Reserve Release
While gas stations are dealing with low profit margins, the Biden administration is blaming rising gasoline prices on these businesses.During a White House
meeting on Sept. 26, President Joe Biden insisted that gas stations and oil companies are making a “lot of profit” due to which the public is paying the price of high inflation.
“To the companies running gas stations and setting those prices at the pump: Bring down the prices you’re charging at the pump to reflect the cost you pay for the product. Do it now,” the president said.
Meanwhile, two leading oil industry groups have raised concerns that the Biden administration might limit or ban the export of refined petroleum products to build domestic inventories of gasoline.
If implemented, such a move will limit the markets for refiners, curb capacity, and push up gas prices in the long run, noted Patrick De Haan, an oil expert, in a
tweet on Oct. 5.
Under the Biden administration, the Strategic Petroleum Reserve dropped to 422.858 million barrels of oil, as of Sept. 23, from 617 million barrels on Oct. 1, 2021. This is the lowest level since 1984.
In an
interview with Just the News, Tim Stewart, the head of the U.S. Oil and Gas Association, pointed out that the United States is selling more oil from its reserves than the production of medium-sized OPEC nations like Angola or Algeria are selling.
“We’re selling twice as much per day than we’re producing out of Alaska. That puts us somewhere between Exxon and Conoco in terms of … the impact we’re having on the daily supply—and this is happening without new oil going in to replace it,” he said.
