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Why Gas Prices Fluctuate (Did You Know 95% of Gas Stations Are Owned By Independent Convenience Store Companies?)

Why Are Gas Prices So Damn High Banner Artwork

Why are gas prices too damn high?!

Why do gas prices fluctuate? Did you know 95% of gas stations are independently owned by convenience store companies? Big Oil only owns 1% of actual gas stations, that set the prices you pay at the pump.

I came across this really interesting article on Herman Cain’s website CainTV (You’ll remember him as the black Pizza Businessman that ran for Republican President in 2012), posted on JobCreator’s.net, and thought I’d share it (which they encourage, they even write at the bottom of the article… “Please steal our stuff!” :D)

Gas Prices And My Mom
by KATHY HOEKSTRA

As I drove my kids home from school Monday, I noted a nearby gas station had regular unleaded posted at $3.74 per gallon. My children will attest to the next part. As we drove by, I announced to them that “after I drop you guys off, I’m coming back to fill up, because the two stations a half mile down the road has it for $3.99 a gallon.”

For a 2003 Ford Explorer, that’s a pretty significant savings.

Less than 20 minutes later, I returned to take advantage of this quarter-per-gallon difference, only to find the price had jumped to the same $3.99 per gallon as its competitors down the street.

When I realized how much more I’d be forking over to fill my SUV, I heard echoes of conversations my late mother and I had over gas prices. (“Conversations”, by the way, is a polite word for outright arguments between mothers and daughters.)

Notice of any fluctuation in the price of gasoline would inevitably prompt numerous complaints from my mom. The most common of which became the basis of our frequent ‘conversations’: Her belief that gas station owners collude with one another to rig prices so as to make tons of money from gasoline sales at the expense of hardworking, taxpaying motorists.

My mother was a smart woman. But her career path of registered nurse-turned-college instructor took her nowhere near energy policy or economics. Like many Americans, she simply never took the time to see how gas prices are determined and just who benefits from them.

My trade, on the other hand, is journalism that has conjoined with public policy. I tried to counter her arguments with at least rudimentary facts and logic to prove her wrong, but I failed on every level. I know fuel sales profits are miniscule for retailers. I know commodities futures play a role in wholesale gas prices, and this has a big impact on how retailers set their prices. I also know ‘Big Oil’ doesn’t own each individual retailer.

But try telling any of this to my mother.

I may have had more success if I had the National Association of Convenience Stores’ Annual Fuels Report 2011 in hand during these ‘conversations’. Since convenience stores (a.k.a. small businesses) sell about 80 percent of all the fuel bought in the United States, the NACS knows of which it speaks.

Black Guy Gas Prices Are Too Damn High Jimmy McMillan Republican 2012 Presidential Candidate

Everyone remembers this black guy? Right? RIGHT?!

I’d be able to tell my mom the following, and show it to her in black and white:

* The typical retailer averages about 3 cents per gallon in profit. This is based on the premise that it costs a retailer some 12 cents to sell a gallon of gasoline, with a five year average markup of 15 cents. Consider as well that credit card fees per transaction can eat into even that 3 cent profit. In fact, in 2009, credit and debit card fees averaged 4.7 cents per gallon, with plastic used for 60 to 70 percent of all transactions at the pump. Gas stations make a much bigger profit on non-fuel sales.

* Small businesses ‘often don’t have the resources to brand their stores as anything beyond the brand of fuel they sell.’ That leads people like my mom to think all gas stations are owned by ‘big oil’. In reality, 95 percent of stores are owned by independent convenience store companies (only one percent, by the way, is owned by one of the ‘big oil’ companies.)

* Motor fuel sales accounted for more than two-thirds of all convenience store sales in 2009. But with low profit margins, fuel sales brought in less than one third of the stores’ gross margin dollars. (In normal-speak, this means gasoline sales accounted for two-thirds of the stores’ revenue but only one-third of the stores’ profits.)

NACS also provides a handy primer on just what influences gas prices, boiling it down to two basic areas.

First, the retailer itself:

* Branded vs. Unbranded Fuel – This is like my local grocery store which pays much more to sell General Mills’ Cinnamon Toast Crunch cereal vs. its generic brand called ‘Cinnamon Swirls’. Therefore, the store has to charge me more for General Mills’ cereals than its own brand. Like the grocery store, fuel retailers pay more for brand name fuel, which means they have to charge a little more at the pump.

* Dealer Tank Wagon vs. Rack – Basically, a ‘tank wagon’ delivers fuel right to the gas station. This may cost more than the retailer having to go get it from a ‘rack’ or terminal.

* Length of Contract – A retailer could have a long-term contract with a specific refiner. A contract can be for 20 years or longer, which NACS says can also affect the price a retailer pays for fuel.

* Volume – As with nearly all other businesses, fuel retailers could get a better deal buying in bulk.

Secondly, and much more impactful, is what happens before the gasoline even reaches the retailer:

* Crude Oil Prices – According to NACS, this is the granddaddy of all gas price influencers. Not only does the cost of crude oil account for 68 percent of the retail price of gasoline, but they can have “huge swings.” And with about 42 gallons in a barrel, “a rough calculation is that retail prices ultimately move approximately 2.5 cents for every $1 change in the price of crude oil.”

* Replacement Costs – Since stores typically sell 120,000 gallons of gas a month, they need to think about how much they’ll shell out for their next fuel shipment. As NACS puts it, “even slight wholesale price variations can increase a retailer’s replacement cost by hundreds – or even thousands – of dollars.”

* Taxes – These have nowhere near the impact on our day to day gas prices as the crude oil fluctuations. While there is much to be debated about the federal and state fuel taxes, it is highly improbable there was a 25 cents per gallon tax increase in the Michigan town over a 20 minute period on a Monday afternoon.

That leaves refining costs and distribution/marketing, which, like taxes, tend to be more static in terms of the frequent price hikes and drops we see on a day-to-day basis.

I’ll never know if all of these facts would have convinced my mom to let go of her lifelong stable of preconceived – and incorrect – notions about why gas prices at all the neighborhood stations go up the same amount all within a few hours of each other.

But it’s not too late to explain to my kids on the next trip home from school. And they’re both boys. I do not anticipate the same degree of ‘conversation’ on this topic.

 

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Olympians RNC2012 Speech Full Video With Kim Rhode, Michael Eruzione, Derek Parra. Discuss Romney’s Turnaround of Salt Lake Winter Olympics In 2002

Olympians RNC2012 Speech ArtOlympians RNC2012 speech (full video below) from Kim Rhode, Michael Eruzione, Derek Parra who spoke at the Republican National Convention 2012 to praise how he turned around the Salt Lake Winter Olympics from 2002.

These guys and gals are American heroes and it was great to hear from them and talk about how Mitt Romney took a disaster and made it into a huge success.

 

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Cuban Hispanic Marco Rubio RNC2012 Full Speech Video Of Keynote For Florida Senator. Speaks In Spanish And Talks About the Greatness of America That Allowed His Family To Succeed Despite Cuban Origins

Marco Rubio RNC2012 Speech Photo Pic For Cuban Hispanic Senator From Florida

Marco Rubio is most likely a possible future Republican President.

Hispanic Senator Marco Rubio’s RNC2012 speech (full video below) propelled this Spanish-speaking Cuban into the spotlight as the future of the Republican Party.

In his speech he talked about the greatness of America that allowed the son of Cuban immigrants who fled Castro’s terror to rise all the way up to be a successful Hispanic Republican Senator.

I thought this speech was absolutely amazing and it really proved Marco Rubio’s prowess in delivering a powerful speech. He is a much more likeable guy when he speaks than I had previously thought, and it was a great opening as Marco Rubio introduced Republican Party 2012 Candidate Mitt Romney and Vice President Paul Ryan!

 

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Ronald Reagen Tribute With Newt & Callista Gingrich RNC2012 Full Speech Video And Trailer

Newt & Callista Gingrich Ronald Reagen Tribute RNC2012 Speech Photo Pic

Newt & Callista Gingrich were onstage at the RNC2012 to talk of Ronald Reagen’s legacy.

Newt Gingrich & Callista Gingrich’s RNC2012 speech (full video below) was a Ronald Reagen tribute trailer that brought tears to my eyes, with a fantastic look at our President during the 80s (too young for me to remember).

Their duo speech itself was a bit tough to listen to as they went back and forth between each other (I always hate that), but either way it was a nice tribute to one of the greatest Republicans and Presidents of all time.

 

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Jeb Bush RNC2012 Full Speech Video Talks Education In Major Speech From Former Florida Governor

Jeb Bush RNC2012 Speech Photo Pic

Jeb Bush spoke at the RNC2012 on education, as the former Governor of Florida.

Jeb Bush’s RNC2012 speech (full video below) focused exclusively on education, how to reform it, and what is needed by Romney Ryan 2012 to prevent our schools and kids from failing.

Jeb Bush is the brother of George W. Bush and son of George H.W. Bush, but is most well known for his extremely successful tenure as the former Governor of Florida.

 

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Clint Eastwood RNC2012 Full Speech Video Of Obama the Empty Chair Or The Emperor Has No Clothes. If Someones Not Doing the Job You Gotta Let Them Go (Romney Ryan 2012)

Clint Eastwood RNC2012 Speech Photo On Stage Dirty Harry

Clint Eastwood got the crowd laughing as he poked fun at Obama, the empty chair.

Clint Eastwood’s RNC2012 speech (full video below) blew up the joint when he got on stage to support Romney Ryan 2012.

“If someone’s not doing the job, you gotta let them go.” – Clint Eastwood RNC2012.

Clint Eastwood also did a funny skit as he pretended to talk to Obama, an empty chair, in a fun take on “The Emperor Has No Clothes”. And the fact that Obama has been completely absent as a leader during the last several years.

 

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John Thune RNC2012 Full Speech Video From South Dakota Senator And Future Star

John Thune RNC2012 Speech Photo From South Dakota Senator

South Dakota Senator John Thune is a powerful presence and rising Republican star.

John Thune’s RNC2012 speech (full video below) comes from another rising star of the Republican Party.

Not yet a household name, South Dakota Senator John Thune will be recognizable to many who have seen him speak on several news shows and often on Fox News with Greta’s show “On the Record”.

A very strong, proud man, Thune looks like the type of person that may become a future President. Either way, he will surely have a big future in the Republican Party and the years ahead.

 

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