GAS: Prices squeeze stations, too

Several have closed in recent months, providing extra bump at pump

By CHRIS BAGLEY - Staff Writer | Thursday, May 8, 2008 5:47 PM PDT

Record wholesale prices for gasoline have squeezed profit margins for gas stations in North County and elsewhere, a development that other station owners and a consumer advocate say are responsible for several recent closings.

Charles Langley, an advocate and analyst with the San Diego-based Consumer Utility Action Network, estimates that twice as many North County stations have closed since 1998 as have opened. He said he suspects the closings, which include four this year, are a reason that pump prices in North County have risen by a bit more than in central San Diego over the decade.

In contrast to the relative handful of large corporations that produce gasoline from oil, the thousands of station owners typically have just one to five locations, according to the National Association of Convenience Stores. They compete intensely with one another, knowing that a driver who passes a station advertising gas for $3.80 a gallon can easily pull into a nearby station with a posted price for $3.79.

The California Energy Commission estimates that independent stations' average margin, a measure that includes profits and marketing costs, has fallen to 6 cents a gallon, compared to 34 cents a gallon for refiners and the $2.83 that buys the oil. Station owners say rising prices at the wholesale level have made the retail market even more competitive.

"They're killing us," said Lawrence Kourie, who co-owns seven stations, including three in Encinitas.

The average retail price of regular unleaded fell 1.5 cents from last week's record to $3.90 a gallon on Thursday, according to Langley's weekly survey of 148 North County stations. Diesel rose by 2 cents to a record $4.47.

Consumers and independent gas stations are almost certain to feel an even tighter squeeze in the next few weeks because of rising prices at the wholesale level, Langley said: Oil prices hit new records near $124 a barrel Wednesday night before falling back slightly on Thursday.

Raw gasoline for blending shot up to $3.19 a gallon Thursday from $2.97 a week earlier, Langley said, citing data from Los Angeles-area ports.

Stations that sell unbranded gasoline help to keep retail prices in line because they can often buy surplus gas at the lowest wholesale prices, Langley said. More closings could add a few extra pennies onto the cost of each gallon in coming years, he said.

Independent gas stations already closed this year include Reflecshine on College Avenue in Oceanside and Regent Gas Station at Highway 101 and F Street in Leucadia.

Oceanside Gas, an independent, unbranded station on Mission Avenue, closed last month after just a couple of years in operation.

A couple of miles down the road, gas-station owner Mohsen Arabshahi said he believes rising wholesale prices were the reason.

Joe Carr, who owns a repair shop and three pumps on Mission Avenue, said there may have been other reasons, but Carr said there's little doubt that higher gas costs and intensifying competition are to blame in most such cases.

"I haven't made any money (on gas) since Bush got in office," Carr said Thursday morning. "And it seems like someone in Sacramento is always writing a new law. I don't know how much longer I'm going to sell fuel."

A couple of minutes later, Oceanside resident Joe Bayer pulled his four-door Honda Civic up to one of Carr's pumps, where regular gas was $3.85 a gallon. Bayer said he's been buying gas at Carr's and other stations near Camp Pendleton's back gate because they're generally cheaper than the stations at traffic lights on nearby Highway 76. But he certainly doesn't drive up and down Mission Avenue looking for the best deal because there are no longer enough stations there to matter, he said.

"It's not a matter of shopping," Bayer said. "It's a matter of who's closing."

The closings reflect a squeeze between higher wholesale prices and thrifty drivers, Bill Douglas, a former chairman of the National Association of Convenience Stores said in congressional testimony Wednesday. The average convenience store made just $23,335 in profits last year, he told the House of Representatives' Anti-Fraud Task Force.

The California Board of Equalization, which collects sales tax from gas stations and other retailers, reported last week that statewide gas consumption in January fell 8.6 percent from December and 4.5 percent from January 2007. Consumption for the full year fell by 1 percent from 2006, the agency reported. Economists have attributed the year-to-year declines, rare in recent history, to a weakening economy and to drivers who are carpooling or driving smaller vehicles.

North County drivers interviewed in recent weeks have said they're also making fewer trips; at $50 to $100, each tank eats up a larger slice of the gasoline budget, some have said.

"You can visibly see the hurt in their faces," Carr said Thursday. "They're not smiling."

Contact staff writer Chris Bagley at (760) 740-5444 or cbagley @ nctimes.com.