Jim Rendon
1. "Good luck finding the best deal."
With gas prices hovering at around $3 a gallon since spring, consumers are getting desperate. Some have cut back on driving; others have swapped their gas guzzlers for economy cars. And everyone is shopping around for the cheapest gas. The problem is, drivers often don't know where to find the best deal from day to day.
Most stations are branded — meaning the name of a major oil company hangs out front — and must buy gas from their proprietary company. They can't shop around. With a lock on sales, the oil companies charge each station a different price depending on various factors, such as the station's competition and its location. That means a station can pay as much as 46 cents a gallon more than one down the street, and that cost gets passed along to you.
Faced with such instability, Gainesville, Fla., resident Steven King plans ahead: "If I know I'm going out of town, I try not to buy gas so I can fill up after I leave." King says he can save 10 cents a gallon by purchasing gas on the road. You'd be similarly wise to shop around — with prices constantly in motion, the cheapest gas may not be at the same station every time.
2. "I hate high gas prices too."
Stations earn on average between 10 and 15 cents on a gallon of gas. Ironically, they earn the least when prices are highest. As fuel climbs, gas stations must shrink their profit margin to remain competitive, meaning they earn less per gallon than usual. But another big cost during tough times is something they can't do anything about — credit card fees, which add up to about 2.5% of all purchases. When gas is at, say, $2 a gallon, the station pays credit card companies 5 cents a gallon; when gas hits $3, that fee becomes 7.5 cents — more than half the station's entire average profit. Last year gas stations' revenue from fuel grew 25%, while the fees they paid to credit card issuers jumped 40%, to $5.3 billion. "Those credit card fees are miserable for the gas station business," says Mohsen Arabshahi, who owns five Southern California gas stations.
How do station owners make up for lost revenue? "Prices go up like a rocket and come down like a feather," says Richard Gilbert, a professor of economics at UC Berkeley. For several weeks after wholesale prices drop, stations can earn as much as 20 cents 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 better than the competition's. Chevron's gas, for example, is fortified with "Techron," and Amoco Ultimate is supposed to save the planet along with your engine. But today more than ever, one gallon of gas is as good as the next.
True, additives help to clean your engine, but what the companies don't tell you is that all gas does so. Since 1994 the government has required that detergents be added to all gasoline to help prevent fuel injectors from clogging. State and local regulators keep a close watch to make sure those standards are met; in Florida inspectors checked 45,000 samples last year to ensure the state's gas supply was up to snuff, and 99% of the time it was. "There's little difference between brand-name gas and any other," says AAA spokesperson Geoff Sundstrom.
What's more, your local Chevron station may sell gas refined by Shell or Exxon Mobil. Suppliers share pipelines, so they all use the same fuel. And the difference between the most expensive brand-name gas and the lowliest gallon of no-brand fuel? Often just a quart of detergent 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 a no-win proposition. When you swipe a debit card at the pump, the bank doesn't know how much money you'll be spending until you've finished pumping. So to make sure you have the funds to cover the purchase, some stations ask banks to automatically set aside some of your money: That amount used to be $20, but with gas prices going up, stations have started asking banks to hold $50, even $100. That means even if you just topped off your tank for $10, you could be out $100 until the station sends over its bulk transactions, which can take up to three days. If your funds are running low, you might end up bouncing a check in the meantime — even though you had the money in your account.
Unfortunately, paying inside with your debit card isn't much of a solution either. Many banks charge their customers between 50 cents and $1 for the privilege of using their debit card in any PIN-based transaction. The American Bankers Association estimates only 13% of consumers pay these fees, but critics say the practice is on the rise and consumers are often unaware of these charges.
5. "...and don't even consider applying for our gas card."
When it comes to gasoline credit cards, a little research goes a long way. The good deals are great, but the bad deals are really bad. Similar to store cards issued through retailers, gas cards are riddled with drawbacks, says Curtis Arnold, founder of CardRatings.com. APRs are high, starting above 20%; many don't offer rebates on gas purchases; and they often lack standard protections such as fraud monitoring and zero liability for unauthorized transactions.
What about a Visa or MasterCard affiliated with a gasoline brand like Exxon or BP? They often offer lower interest rates and significant rebates, but limit your ability to shop around. In December 2005, a few months after gas hit $3 a gallon, Justin Andringa of Minneapolis considered a Shell MasterCard with a 15% rebate on gas purchases. But the rebate was temporary; he decided to stick with his Citibank Dividend Platinum Plus card, which gives him a 5% rebate on all gas purchases no matter where he buys it. "I'm a college student," Andringa says. "I need to save money." The deals on these cards are constantly changing. So visit CardRatings.com 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. Rising prices have sparked a whole network of sites that post and continually update gas prices at stations across the country. Among them, GasPriceWatch.com and Gaswatch.info help people track pump prices. But the most comprehensive of the bunch 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," says GasBuddy.com cofounder Jason Toews, and they're using the Internet to take control.
It has worked wonders for Sue Foust. Every day, as she passes roughly 10 stations on her commute across Tucson, Foust makes a mental note of their prices, then posts them on TucsonGasPrices.com, a local affiliate of GasBuddy.com. Then every four days or so, when she needs to fill up, she checks the prices others have posted in her area. It turned out the Shell station she used to frequent is one of the most expensive in the city. Now she fills 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 if you're getting all the gas you paid for at the pump. But in some places there's a very good chance you're not. The state or county weights-and-measures department usually checks pumps for accuracy, but in some areas it can be years between inspections. Arizona, for example, has only 18 staff members to check the state's 2,300 stations. That means stations there can expect a visit once every three to four years, according to Steve Meissner, an Arizona Department of Weights and Measures spokesperson. Last year 30% of the more than 2,000 complaints the department received were valid, and it levied $167,000 in fines.
The good news is that it's often easy to catch the most common problem: Older pumps in poor repair may begin charging you for gas 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 fuel is flowing.
8. "I might gouge you on a soda, but my coffee's a bargain."
With margins on gas taking a hit, stations are increasingly looking to their convenience stores for income. In 2005 gross margins for in-store sales were 30%, while the margin on fuel was 7.2%, according to the National Association of Convenience Stores. Given the stats, you'd assume the average Kwik-E-Mart to be a terrible place to buy just about anything. But that's only partially true.
Stock that usually sits on the shelf does tend to be vastly overpriced, so if you forgot ketchup on the way to a barbecue, you can bet you'll pay a lot more for it at a gas station than you would at a supermarket, says David Bishop, director of convenience retailing for Bishop Consulting. What about popular beverages? You'll pay more for a 20-ounce soda at a gas station than you would for a 2-liter bottle in a supermarket; the average price for a liter of water at pumpside marts in 2005 was $1.24, a markup of 55% over wholesale; and energy drinks cost 50% over wholesale, according to Bishop.
But there are bargains to be had: Some high-volume goods, such as cigarettes 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 mechanic have all but come to an end. Station owners are swapping car lifts for beverage cases and car washes, anything that brings in a high-volume stream of income and traffic, says Dennis DeCota, executive director of the California Service Station and Automotive Repair Association. The more people who pull over for a soda, the greater the chance they'll top off their tank and vice versa, the thinking goes. Few owners want the hassle of a business like car repair even if it earns the same amount of money as a convenience store.
In addition, repairing cars is increasingly expensive, and the ill will and potential liability from a fix-it job gone wrong are more of a headache than many owners are willing to risk. Today a service station can require $100,000 worth of diagnostic equipment, a significant investment. It's a risky venture with little payoff, says Southern California station owner Arabshahi. In fact, Arabshahi removed the service 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 don't even need gas to run your car."
Cars run on gasoline — but not all cars need gasoline to run. In fact, 6 million cars on the road today (mostly from U.S. manufacturers and built since 1998) are "flexible fuel" vehicles that can run on E85, a new fuel that is 85% ethanol and only 15% gas. Though E85 is currently available only at 710 stations, it's expected to show up at 2,000 stations by the end of the year, thanks in part to state and federal tax credits.
When Minneapolis resident John Schafer bought a car in late 2001, he chose a Chevy Tahoe because it's a flexible-fuel car. Since then he's filled up almost exclusively with E85. The big difference he's noticed: Cars using E85 get about 15% fewer miles 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."
While E85 generally costs less than regular gas, there is some concern that it may grow prohibitively expensive this summer, when demand is predicted to outpace supply: This year ethanol will be used not only in E85, but it will also compose 15% of every gallon of gas sold. Supplies of ethanol are likely to grow thin, which could drive up the prices of both normal gasoline and E85. And even die-hard Schafer says he won't buy E85 if it starts to cost more than gasoline.
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