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1. “Good luck finding the best deal.”
When it comes to gas prices, most stations are branded — meaning thename of a major oil company hangs out front — and must buy gas fromtheir proprietary company. They can’t shop around.
With a lock on sales, the oil companies charge each station adifferent price depending on various factors, such as the station’scompetition and its location. That means a station might have to pay alot more than one down the street, and that cost gets passed along toyou.
Faced with such instability, Gainesville, Fla., resident Steven Kingplans ahead: “If I know I’m going out of town, I try not to buy gas, soI can fill up after I leave.” King says he can save 10 cents a gallonby purchasing gas on the road. You’d be similarly wise to shop aroundbecause with prices constantly in motion, the cheapest gas may not beat the same station every time.
2. “I hate it when gas prices go up.”
Stations earn, on average, 10 to 15 cents on a gallon of gas.Ironically, they earn the least when prices are highest. When fuelclimbs, gas stations usually must shrink their profit margins to remaincompetitive, meaning they earn less per gallon.
But another big cost during tough times is something they can’t doanything about: credit card fees, which add up to about 2.5% of allpurchases. When gas is at, say, $2 a gallon, stations pay credit cardcompanies 5 cents a gallon; when gas hits $3, that fee becomes 7.5cents, at least half of the stations’ average profits.
“Those credit card fees are miserable for the gas station business,”says Mohsen Arabshahi, who owns five Southern California stations.
How do station owners make up for lost revenue? “Prices go up like arocket and come down like a feather,” says Richard Gilbert, a professorof economics at the University of California, Berkeley. For severalweeks after wholesale prices drop, stations can earn as much as 20cents a gallon before retail prices are lowered to reflect the change.
3. “My gas isn’t better for your car; it’s just more expensive.”
Oil companies spend lots of money explaining why their gas is betterthan the competition’s. Chevron’s gas, for example, is fortified withTechron, and Amoco Ultimate is supposed to save the planet along withyour engine. But today, more than ever, one gallon of gas is as good asthe next.
True, additives help to clean your engine, but what the companiesdon’t tell you is that all gas has them. Since 1994, the government hasrequired that detergents be added to all gasoline to help prevent fuelinjectors from clogging.
State and local regulators keep a close watch to make sure thosestandards are met; a 2005 study indicated that Florida inspectorschecked 45,000 samples to ensure the state’s gas supply was up tosnuff, and 99% of the time it was.
“There’s little difference between brand-name gas and any other,” AAA spokesman Geoff Sundstrom says.
What’s more, your local Chevron station may sell gas refined byShell or Exxon Mobil. Suppliers share pipelines, so they all use thesame fuel. And the difference between the most expensive brand-name gasand the lowliest gallon of no-brand fuel? Often just a quart ofdetergent added to an 8,000-gallon tanker truck.
4. “If you’re smart, you’ll put that debit card away.”
Your debit card might be a convenient way to pay for gas, but it’s ano-win proposition. When you swipe a debit card at the pump, the bankdoesn’t know how much money you’ll be spending until you’ve finishedpumping. So to make sure you have the funds to cover the purchase, somestations ask banks to automatically set aside some of your money: Thatamount can be $20 or more. That means even if you just topped off yourtank for $10, you could be out $30, $50 or even $100 until the stationsends over its bulk transactions, which can take up to three days. Ifyour funds are running low, you might end up bouncing a check in themeantime, even though you had the money in your account.
Unfortunately, paying inside with your debit card isn’t much of asolution either. Many banks charge their customers 50 cents to $1 forthe privilege of using their debit card in any PIN-based transaction.The American Bankers Association estimates only 13% of consumers paythese fees, but critics say the practice is on the rise and thatconsumers are often unaware of these charges.
5. “Don’t even consider applying for our gas card.”
When it comes to gasoline credit cards, a little research goes along way. The good deals are great, but the bad deals are really bad.Similar to store cards issued through retailers, gas cards are riddledwith drawbacks, says Curtis Arnold, the founder of CardRatings.com.Annual percentage rates are high, starting above 20%; many don’t offerrebates on gas purchases; and they often lack standard protections suchas fraud monitoring and zero liability for unauthorized transactions.
What about a Visa or MasterCard affiliated with a gasoline brandsuch as Exxon or BP? They often offer lower interest rates andsignificant rebates but limit your ability to shop around. In December2005, a few months after gas hit $3 a gallon, Justin Andringa ofMinneapolis considered a branded credit card that came with a 15%rebate on gas purchases of that brand. But the rebate was temporary; hedecided to stick with the card he had, which then offered a 5% rebateon gas purchases no matter where he bought it.
“I’m a college student,” Andringa says. “I need to save money.”
The deals on cards are constantly changing. CardRatings.com is a good place to find updated information.
6. “Looking for the cheapest gas in town? Try the Internet.”
You can’t actually buy gas online, but Web resources can help you find the cheapest fill-up in town. Among them, GasPriceWatch.com and Gaswatch.info help people track pump prices. More comprehensive is GasBuddy.com, which includes a network of 174 local sites, complete with maps and message boards that tally gas price by ZIP code.
“People are frustrated by the variation in the price of gas,” saysGasBuddy.com co-founder Jason Toews, and they’re using the Internet totake control.
It has worked wonders for Sue Foust. Every day, as she passesroughly 10 stations on her commute across Tucson, Ariz., Foust notestheir prices, then posts them on TucsonGasPrices.com, a local affiliate of GasBuddy.com.
Every four days or so, when she needs to fill up, she checks theprices others have posted in her area. It turned out the Shell stationshe used to frequent is one of the most expensive in the city. Now shefills up elsewhere. “I really do feel like I’m saving money,” she says.
7. “It’s a gallon when I say it’s a gallon.”
It’s hard to know whether you’re getting all the gas you paid for atthe pump. But in some places there’s a very good chance you’re not.State or county authorities check pumps for accuracy, but in some areasit can be years between inspections. Arizona, for example, has only 18staff members to check the state’s 2,300 stations.
That means stations there can expect a visit once every three tofour years, according to Steve Meissner, a spokesman for the ArizonaDepartment of Weights and Measures. In 2005, 30% of the more than 2,000complaints the department received were valid, and it levied $167,000in fines. The good news is that it’s often easy to catch the mostcommon problem: Older pumps in poor repair may begin charging you forgas before you’ve pumped it. Check the meter to make sure it registers$0.00 before you begin and doesn’t start charging you before the fuelis flowing.
8. “I might gouge you on a soda, but my coffee’s a real bargain.”
With margins on gas taking a hit — in 2006, fuel sales made up 71%of revenue but only 34% of gross margins — stations are increasinglylooking to their convenience stores for income. Given that fact, you’dassume the average Kwik-E-Mart would be a terrible place to buy justabout anything. But that’s only partly true.
Stock that usually sits on the shelf does tend to be vastlyoverpriced, so if you forgot ketchup on the way to a barbecue, you canbet you’ll pay a lot more for it at a gas station than you would at asupermarket, says David Bishop, the director of convenience retailingfor Willard Bishop Consulting. What about popular beverages? You’ll paymore for a 20-ounce soda at a gas station than you would for a 2-literbottle in a supermarket; water and energy drinks similarly tend to havehigh markups.
But there are bargains to be had: Some high-volume goods, such ascigarettes and beer, are often competitively priced at gas stations.And a cup of coffee goes for a fraction of what you’d pay at Starbucks.
9. “If you’re having car trouble, you’re in the wrong place.”
The days of the local gas station staffed with a skilled mechanichave all but come to an end. Most station owners have swapped car liftsfor beverage cases and carwashes, or anything else that brings in ahigh-volume stream of income and traffic, says Dennis DeCota, theexecutive director of the California Service Station and AutomotiveRepair Association. The more people who pull over for a soda, thegreater the chance they’ll top off their tank and vice versa, thethinking goes. Few owners want the hassle of a business such as carrepair, even if it earns the same amount of money as a conveniencestore.
In addition, repairing cars is increasingly expensive, and the illwill and potential liability from a fix-it job gone wrong are more of aheadache than many owners are willing to risk. Today a service stationcan require $100,000 worth of diagnostic equipment — a significantinvestment. It’s a risky venture with little payoff, says SouthernCalifornia station owner Arabshahi. In fact, Arabshahi removed theservice station from one of his locations after he bought it.
“I don’t have a service station because I am not a mechanic,” he says. “If he messes up a job, then it’s my name on there.”
10. “You might not need regular gas to run your car.”
Cars run on gasoline, but not all cars need traditional gasoline torun. In fact, 6 million cars on the road today (mostly from U.S.manufacturers and built since 1998) are “flexible fuel” vehicles thatcan run on E85, a fuel that is 85% ethanol and only 15% gas.
When Minneapolis resident John Schafer bought a car in late 2001, he chose a Chevy Tahoebecause it’s a flexible-fuel car. Since then he’s filled up almostexclusively with E85. The big difference he’s noticed: about 15% fewermiles to the gallon. But it’s a drawback he’s willing to put up with.
“I’m committed to the technology,” Schafer says. “With E85, it burns cleaner, so it won’t pollute as much.”
Although E85 generally costs less than regular gas, there is someconcern that it may grow prohibitively expensive as demand outpacessupply: By 2006, ethanol was being used more than just in E85; it alsocomposed 15% of every gallon of gas sold. Supplies of ethanol arelikely to grow thin, which could drive up the price of E85. And evendie-hard Schafer says he won’t buy E85 if it starts to cost more thangasoline.
