Pain at the pump
|Private gas station and convenience store owners battle daily with corporate-owned station prices.|
Ali Fini might not have the cheapest gas around, but he claimed he was selling it in mid-May at a loss of 6 cents per gallon at Tiger Express on Lee Drive to move beer and cigarettes.
A private-store owner since 2004, Fini said he had no other choice. Two corporate-owned gas stations a couple of blocks away on Highland Road were undercutting his gasoline purchasing power.
“I bought it at $3.55, I'm selling it at $3.49—it's that bad,” Fini says. “I have to compete with those corporations.”
At the same time, pain at the pump was a bit different for Azhar Siddiqui, owner of LaRouge Mart on Jefferson Highway. He was selling regular gas at $3.65 a gallon and also relying on his store's side businesses—Popeyes Louisiana Kitchen and a car wash—to attract customers.
But, Siddiqui says, the real lure for customers is what's on the street sign: gas prices.
“If they don't come in, it affects everything,” Siddiqui says. “Every second person has multiple purchases.”
According to IBISWorld Inc., which provides market research reports on U.S. industries, the typical profit of a privately owned gas station and convenience store is about 2%, while their ranks have declined by about 4.5% over the past five years to 92,100.
Both Fini and Siddiqui say cigarettes account for about 40% of inside sales; beer and alcohol make up another 30% inside Fini's store.
Besides business competition, Siddiqui says, credit card fees dig deeper in his pocket, costing him 3% of sales on average. American Express, he notes, is the worst, going higher than 3%.
Fini says he sells about 10,000 gallons of gas each month from his four pumps. In April he had to spend $2,100 to repair a pump.
When President Obama came into office, Fini says he was happy. Gas prices dropped and he bought $22,000 in supply. But prices kept dropping before bottoming out around $3 a gallon.
“It got to the point where I was selling 89 cents below my cost to sell it,” Fini says. “I don't have no choice. It's gas; I have to get rid of it.”
In all, Fini says he lost nearly $15,000.
Fini's gas supplier, Dustin Collette, of R.A. Collette Oil Co. in Baton Rouge, compares selling gas to farming turnips. It takes a borrowed investment for supply and time to get that investment back.
“A (tanker) truck is 9,000 gallons,” Collette says. “Not many people can come up with that up-front. It's hard to have that much cash flow.”
Collette, who supplies gas to 27 private-store owners in the Baton Rouge area, says Fini's Tiger Express is the only store he knows of in the city that offers both conventional and ethanol gas. The markup for conventional gas—an extra 15 to 20 cents per gallon—affects Fini's overall prices, but he carries the pure gasoline to cater to the neighborhood behind him, where customers have boats and small engines that many believe don't operate well with 10% ethanol in their tanks.
Only four stores, including Fini's, offer conventional gas in the city, Collette says. All the rest offer only ethanol blends.
With gas prices dropping each summer over the past three to four years, Collette says he knew in mid-May that prices had peaked. Gas supplies had been up for months while demand was down, “creating an artificial high.”
“But in this business, you never know,” Collette says. “The highs are never as high as they say they're going to be, and the lows are never as low as they say they're going to be.”
Collette says he'd be surprised if gas prices drop much lower by July, now that summertime driving is here and demand is ticking up.
The nearly 30-cent pulldown in gas prices between May and June is also related to crude oil on the stock market and economic unrest in Europe, Collette says.
When gas prices go up, demand weakens, and both Fini and Collette are affected.
“It's a game of pennies, literally,” Collette says.
Besides oil and gas volatility, Fini has contended with losing his liquor license for five years—he got it back a year ago—and getting shot in the thigh during an armed robbery on March 7, 2007. Bullet holes still pockmark the doorframe and ceiling from shots that whizzed past his head.
Yet Fini instead speaks at great length about the damage his business endured when beer and wine were removed from his shelves. The sandwich making on a side counter also went; foot traffic slowed and random purchases dropped. And Fini fell into debt.
In a way, alcohol sales are as intricately entwined in the business of a private gas station and convenience store as the fuel itself.
“When we don't have [alcohol] the whole thing goes down,” Fini says.
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