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With the ever increasing cost of fuel, some consumers feel it might just be unfair……

Gas prices are spiking again — to an average of $3.22 a gallon, and close to $4 a gallon in many areas.

And some oil executives are now warning that the current shortages of fuel could become a long-term problem, leading to stubbornly higher prices at the pump.

They point to a surprising culprit: uncertainty created by the government’s push to increase the supply of biofuels like ethanol in coming years.

In his State of the Union address in January, President Bush called for a sharp increase in the use of biofuels, along with some improvement in automobile fuel efficiency to reduce America’s use of gasoline by 20 percent within 10 years. Congress is considering legislation calling for a nearly fivefold increase in the use of ethanol.

That has forced many oil companies to reconsider or scale back their plans for constructing new refinery capacity.

In hearings before Congress last year, oil executives outlined plans to increase fuel production by expanding existing refineries. Those plans would add capacity of 1.6 million to 1.8 million barrels a day over the next five years, for an increase of 10 percent, according to the National Petrochemical and Refiners Association.

But those plans have since been scaled back to more than one million barrels a day, according to the Energy Information Administration, an arm of the federal government.

“If the national policy of the country is to push for dramatic increases in the biofuels industry, this is a disincentive for those making investment decisions on expanding capacity in oil products and refining,” said John D. Hofmeister, the president of the Shell Oil Company. “Industrywide, this will have an impact.”

The concerns were echoed in a recent report by Barclays Capital, which said the uncertainty about the ethanol growth “will do little to accelerate desperately needed investment in complex United States refining units.”

“Indeed, it is likely to deter and further delay investment, if not rule out many refinery investments completely.”

Even so, the current cost of gas — which in real terms is approaching the old peak of $1.42 a gallon in March 1981, or $3.31 adjusted for inflation — has renewed suspicions that the oil industry is looking for ways to keep profits high by delaying much-needed investments. Senator Charles E. Schumer, Democrat of New York, began hearings yesterday on the topic “Is Market Concentration in the U.S. Petroleum Industry Harming Consumers?”

And the House voted yesterday by a narrow margin to penalize any oil companies, traders or retailers found to be charging “unconscionably excessive” prices for gasoline and other fuels. President Bush will probably veto the measure because the White House has said such legislation would amount to price controls.

Experts point to many short-term reasons the United States is running low on gasoline, causing prices to rise: many oil companies are doing maintenance work on refineries; new federal rules make fuels cleaner but costlier; and a string of delays, fires and accidents in the industry have reduced supplies just when drivers are starting to hit the road for summer vacations. Many analysts predict prices will keep rising, then soften later in the summer as demand trails off.

Energy executives dismissed any suggestions that they were intentionally keeping gasoline off the market.

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As gas prices hit another record last Friday, Jeff Curro couldn’t take it anymore.

After owning the Shell gas station at 3075 N. 124th St. in Brookfield for 20 years, Jeff Curro has stopped selling gas. As gas prices rose, his profit margin dropped.

He wasn’t a motorist at the pump fed up by the blur of numbers spinning higher as he filled his tank.

Curro is a gas station owner who has stopped selling gas to his own customers.

After selling gas at N. 124th and W. Burleigh streets for 20 years, Curro turned off his pumps at his Shell station in Brookfield when the price he was being asked to pay was just too much.

Including the wholesale cost of gas and other taxes and charges, he was being asked to pay $3.44 a gallon Friday, a day when the competing stations down the street were selling gasoline for $3.47.

“Three cents a gallon doesn’t cut it,” Curro said. “It doesn’t pay the bills.”

Add to that the money he loses every time a motorist uses a credit card at the pump, and there was no reason to keep selling gas, Curro said.

Credit card companies and banks get an average of 2.75% on every gallon of gas sold, and credit card processing fees now rank as the second-biggest expense for gas station operators, according to the National Association of Convenience Stores.

“The way I see it is, I’m doing all the work of providing the labor, the wages, the electricity, the lighting, the maintenance of the pumps, the repairs and the insurance, which is quite substantial,” Curro said. “I’m doing all the work, and somebody else is getting fat on me.”

Curro isn’t alone in deciding to not sell gas anymore. Casey O’Gorman did the same thing. In business for 25 years near State Fair Park, his West Allis service station is now doing business exclusively as Auto Analyzers. The Shell name came down a few months back.

“I finally had to just pull the plug on it and say, ‘I can’t afford to do it anymore,’ ” O’Gorman said.

High wholesale prices
Curro and O’Gorman are leaving a relatively small and disappearing group of service station owners who both sell gas and repair cars.

Independent auto-repair shops face competition from car dealerships and quick-lube repair shops, and in the sale of gasoline, they compete against full-line convenience stores.

Most gas stations today double as convenience stores, and although they generate more than two-thirds of sales from gas, two-thirds of profit comes from in-store sales of cigarettes, drinks and food, according to the convenience store association.

When drivers are paying more, they think that means higher profits for the filling station, said Bob Bartlett, executive vice president of the Wisconsin Petroleum Marketers & Convenience Stores Association.

The case of the two Shell stations stopping sales of gas illustrates the challenges faced by independent station owners across the state, Bartlett said. Nine of 10 stations in the state are independently owned and run, he said.

Between Feb. 1 and Monday, Bartlett said, the average wholesale price paid by service stations in Milwaukee to buy gasoline rose from $1.66 to $2.94. Add in taxes paid to the federal and state governments, as well as transportation costs, and the average service station had to cover $3.47 on Monday, without charging any profit. On that day, stations were charging their customers $3.47 on average in Milwaukee, according to AAA’s Daily Fuel Gauge Report.

“People are upset about oil and gas prices, but it’s not this guy right here,” Bartlett said of the independent gas station owner. “He’s not OPEC. He’s not refining it. He’s buying it kind of like I am, right at the end of the line here.”

Sales up, profit down
Curro has been thinking about shutting down his gas pumps for about a year, and he has complained to his supplier about prices.

When he shut down his pumps, he was charging $3.59 a gallon, 12 cents higher than the competing stations nearby.

“Even at $3.59, I was making 15 cents, but I was still giving 10 of those cents to MasterCard,” he said.

Nationally, the Association of Convenience Stores estimates that sales rose 12% but profit fell 23% industrywide last year, and for the first time, credit card fees were higher than the industry’s profit.

Lower margins on the sale of fuel and credit card fees were the two main factors behind the drop in profit, the association said, as profit margins on the sale of fuel dipped to their lowest point since 1983.

Until January, O’Gorman and the predecessors at S. 84th St. and W. Greenfield Ave. sold gasoline on that corner since 1938.

He says he never made much money selling gas but started seeing margins nosedive last year when gas prices rose.

“More and more, it was crowding out my real form of income,” O’Gorman said, referring to car repairs.

“Then you listen to the public, and they say we’re gouging them. Who needs to listen to that? I’d need to have my head examined.”

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