Ouch! Rocket-like Gasoline Prices Don’t Translate Into Seller’s Profit

RIO GRANDE — With the national average price of gasoline kissing $3.70 a gallon, the cost of getting from hither to yon has become the focal point of most families’ already cash- strapped budgets.
According to American Automobile Association statistics, the current national average price of a gallon of regular gasoline on Mon. Feb. 27 was $3.698. A week prior, the price was $3.565. A month prior found gas to cost $3.406, and a year ago the cost of a gallon of petrol went for the bargain price of $3.354. Drivers in New Jersey seem to be faring a bit better with a state average of $3.589 per gallon of regular. On Mon-day here, regular was selling for $3.479 per gallon.
While it may be easy to put the blame on the local gas station for the increase, that’s not necessarily the case, according to Sal Risalvato, executive director of the New Jersey Gasoline, Convenience Store and Automotive Association (NJGCA), headquartered in Springfield.
“What we’re experiencing right now is going to continue forever because the marketplace is going to remain volatile,” said Risalvato. “As long as we have the geo-political situation that exists in the Middle East and petroleum is a source that may one day run out.”
Risalvato foresees a day when a gallon of gas might cost a lot more. The last time drivers topped off their tanks at $4 a gallon was 2008.
“I almost hate saying it, if there is a problem in the Middle East, if something blows up there, like a war, we will zoom past $4 and cruise past $5. If there is any geo-political problem that disrupts the flow of oil, you will see it surpass $6 a gallon.”
Robert Reich, former Secretary of Labor and now Professor of Public Policy at University of California at Berkeley wrote in an article for the non-profit website “NationofChange,” the reason for the rise in gas prices is threefold, including Iran’s decision to cut oil exports to Great Britain and France, the “hopes for a global economic recovery, which would mean increased oil consumption,” and the “overwhelming bets of hedge funds and other money mangers that oil prices will rise on the basis of the first two reasons.”
“What’s going on in the Middle East,” said Risalvato, “is that speculators are betting on problems. If those problems don’t happen, then the prices will drop.”
According to Risalvato, demand for gasoline in the United States has dropped in the past few years and currently remains stable. “Statistically, we are using less and paying more for it. But in other parts of the world, like India and China, they are sucking it up,” he said.
On the local level, with gas prices sky-high and shooting toward the stratosphere, local gas stations are not sharing in the record profits en-joyed by large oil companies.
According to Risalvato, on a $3 gallon of gasoline, a local retailer takes in three cents and makes a penny on the gallon after paying overhead.
“The retailer is at the mercy of everyone up there on the rope,” he said.
The advent of high prices may mean that local stations will be shutting down their pumps.
With credit card companies charging a percentage of the total sale, many independently owned stations are paying most, if not all of their profits to banks. Those costs, coupled with overhead, may mean stations will not be able to operate.
“In 2008 and 2009 we had people closing their doors left and right. At $2.50 or $3 a gallon they’re barely making a profit. At $4 they’re giving away their profit. It’s just a matter of time. Sometimes the property is more valuable than the business.”