Are Gas Stations profitable?
Lately, while filling up at the gas station I have been noticing signs on the gas pump stating that the service station is only making 2% profits on my gas purchase. Only making 2%, are you serious? I find this very hard to believe. Why would anyone open a gas station? If I can make 4.5% just having my money sitting in the bank why in the world would I open a gas station? With companies like Exxon making record profits in 2005, in excess of 36 billion, I have to believe that the service station is earning more than 2 percent! As a business person, the economics of owning a service station while only making 2% profits would suggest a failed business plan, and yet there are gas stations everywhere. How often do you drive through an intersection and find a gas station on all four corners? Don’t try and tell me they make up the money they need to stay open selling cigarettes, candy and milk, because this is simply not true!
So I guess the question that needs to be asked is this. Why put a sign up that states the government is making all the money from the gas sale? What is the motivation? I strongly believe that the government is taking too much tax money from oil, but record profits by the oil companies suggest that the government isn’t the major contributor to high prices at the pumps. Oil companies know that the general population always dissatisfied with paying taxes and the government in general, so I suggest this is simply a ploy to shift blame. Who better then the government to focus the publics attention on? Shame on the oil tycoons for playing this card, and shame on you and me, for falling for such an obviously transparent plan.
If you think this 2% profit is an accurate figure, then have a look on the stock market. There are publicly traded gas stations listed and they sure as heck make more then 2% profit!
May 25th, 2006 at 11:49 am
I think you may be wrong about this. I am currently looking at gas stations to purchase and I have yet to find one that is making money on the gas. Independant gas stations are not getting their gas for less than the big exxon,mobil,shell,ect. The big oil companies are taking out the independants to eliminate competition. The branded stations prices are controlled by the branded oil company. Remember,people didn’t go out and buy gas stations yesterday. At one time it was profitable. How many stations do you see that only sell gas? I think it’s obvious that convenient stores came about to be able to stay in business. It seems to me the gas attracts customers and the money is made in the store. The products in the store have a much bigger profit margin. Do some research.
May 25th, 2006 at 7:21 pm
You think I may be wrong? You ask me to do my research yet you state “I think you may be wrong” and provide no facts to support your position.
I know gas stations are profitable. I know this and yes I have done my research. I am not going to site specific examples but believe me when I say this, gas stations are very profitable.
Like any business plan, it is smart to add other features to bring customers in. For example if you can buy cigarettes at gas station A but not at gas station B, you would probably go to gas station A as they conveniently have cigarettes as well as gas. In some cases you might even go to gas station A when they have more expensive gas. That is why gas stations branch out into other areas. If you can include a car wash into the overall service then you might just draw in people who wish to use that service. If you have coffee, people might just stop gas on their way to work in the morning.
Add on sales and all other customer convenience business ideas are simply a smart business move and are certainly not a sign of an insolvent or financially unstable business. Do you think when the banks decided to go into providing their customers with insurance, mutual funds, RRSP and other financial services that were not a traditional bank service that they were becoming insolvent? When the banks moved towards ATM machines, is that because they were not viable businesses? Certainly not!
I appreciate your position but there is too much evidence that supports that gas stations are profitable.
May 26th, 2006 at 4:52 pm
Where I live we have gas stations every couple of blocks, usually 2-3 per intersection where they can squeeze them in…
Let me ask….if the owner is prepared to put a big investment into the station, and assumingly does their research on the matter….
Why are there so many of them opening up?
Though I do think the point of big gas companies trying to kill off the independant ones has merit.