Falling prices hurt some small gas stations

[December 16, 2008]  PHILADELPHIA (AP) -- With gas prices tumbling to levels last seen in 2004, Scott Royer has grown accustomed to seeing drive-offs by customers once loyal to his family-owned service station in central Pennsylvania -- but not the kind that make him call the police.

Cars roll into the station and the attendant bell rings, but in recent months those customers see the price posted at the big station across the street and roll right back out without even rolling down the window.

Small independent service station owners say they have struggled to keep pace with plunging gas prices. By the time they empty a storage tank of gas, prices have fallen so far that the amount they must charge to recoup the purchase price appears exorbitant compared with high-volume chains.

"We can't fluctuate as much," said Royer, whose father started Royer's Gulf Service Station in Carlisle in the 1960s. "Sometimes I have to just drop and take the loss."

It can take Royer three weeks to sell his 8,500-gallon shipments. When gas prices fall below the wholesale price he paid, he either has to eat the difference or stay with his higher price and risk losing customers.

In just the past month, the national average for a gallon of retail gasoline has fallen more than 55 cents.

"If the price is falling, it really hurts," said Louis Ferrara, who sells about 60,000 gallons a month at his Sunoco in South Philadelphia, compared with average station sales of 75,000 to 100,000 gallons a month.

Station profits and losses do not change that much outside of volatile markets. Over the weekend, prices actually rose slightly for the first time in three months, before falling again Monday.

Gas station chains and large-volume sellers like BJ's and Costco can lower their gas prices and absorb losses more easily than smaller stations because they buy so much gas and have other business to fall back on, said Ralph Bombardiere, executive director of New York State Association of Service Stations and Repair Shops Inc.

In fact, they can sometimes buy the entire 420,000-gallon load from a barge. For smaller stations getting less than 10,000 gallons, there also is sometimes a surcharge.

Over the past 15 years, the total number of gas stations across the country has fallen amid stricter environmental regulations, such as double-walled tanks, according to Carl Boyett, president of Society of Independent Gasoline Marketers of America. Credit card fees also have made business tougher for small station owners.

In 1994, there were a total of 202,878 gas stations in the U.S., a number that dropped to 161,768 in 2008, said Boyett, who is also CEO of Boyett Petroleum, a gasoline distributor in California.

In New York state, there are now about 2,500 to 3,000 independent stations, down from about 10,000 in the late 1970s, according to Bombardiere.

Dave Lalli sold his gas station in Philadelphia in September 2006. The gas market, he said, was simply too tough to navigate. Now he's just running an auto repair shop a few blocks away from his old station.

"It hurts small dealers, but there's not many of them left," Lalli said.

And where a fill-up is made can come down to the difference of a penny a tank.

"There is no consumer loyalty," said Ross DiBono, executive director of the Pennsylvania Gasoline Retailers Association & Allied Trades.

[Associated Press; By PATRICK WALTERS]

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