Motor Fuels

Understanding Gasoline Prices

Gasoline Prices in Virginia

Over 93 percent of the cost of gasoline in Virginia is predetermined before it ever reaches the members of VPCGA. 

That leaves your local marketers with an average of six and a half cents of every dollar you spend on gasoline to pay all of his or her costs, including transporting the gasoline from a storage terminal to the retail location, the expense of operating the store – mortgage/rent, electricity, employee salaries, benefits, property taxes, gasoline drive offs, environmental compliance requirements, etc.-- leaving little room for profit.  No other segment of the retail industry exists on such a narrow margin. 

In Virginia 30.2 cents on every gallon of gasoline goes toward state and federal taxes and fees. 

Additionally half a cent from the state sales tax (the equivalent of an added 7 cents per gallon) is dedicated to transportation, as is an additional 2.1% tax in northern Virginia and Hampton Roads dedicated to fund mass transit!  This compares with the 5 cents consumers pay for virtually all other retail purchases. 

57 percent of the cost of a gallon of gasoline goes to the Major oil companies, Banks and Credit Card Processors.

No VPCGA marketer produces gasoline.  On average 57 cents of each dollar spent on gasoline is for the crude oil on the world market and associated costs to refine crude into gasoline. Every time you use a credit card at the pump, banks and credit card companies charge the store operator a transaction fee averaging about 3%. Many ask who is profiting from higher gas prices? Consumers should ask their credit card companies who have seen transaction fees double without any additional work.

What about the volatile nature of petroleum prices??

The price of gasoline is volatile because the cost of crude oil on the world market is constantly fluctuating.  This problem is further exacerbated by the fact that opposition by some has virtually ended exploration of new domestic sources of crude.  A national “not in my back yard syndrome” has also meant that no new refineries have been built in the United States in more than 25 years.  For this reason, we are forced to rely upon imported oil for a significant percentage of our supply.  International unrest in the Middle East threatens our energy security because of this increased dependence on foreign oil.

In addition to price fluctuations caused by supply, Seasonal changes also impact the price of gasoline in the commonwealth.  Reformulated gasoline is required in suburban Richmond, Tidewater and Northern Virginia during the summer months as a strategy to combat air pollution.    This type of reformulated gasoline averages about 6% more than regular gasoline and the annual spring phase in as fall phase out result in additional compliance costs and short supply.

Virginia Petroleum Convenience and Grocery Association represents more than 600 small businesses that own and operate thousands of retail locations that sell more than 75% of the gasoline sold in the Commonwealth. These businesses collect and remit to the state about three quarters of a billion dollars in fuels taxes each year. Even if they fly the flag of a major oil company brand, members of VPCGA are independent businesses who are in no way controlled by the major oil companies.

Prices rise, profits don't

Gas station owners struggling

By Barbara Hagenbaugh
USA TODAY 

FALLS CHURCH, Va. — Gas station owner Rob Garrett knows drivers are frustrated with high gas prices. What they probably don't realize is that he is, too.

"It hurts us too; that's the thing (drivers) don't understand," he says, looking over a spreadsheet that lays out his expenses on his laptop computer.

Gas station owners like Garrett, 45, prefer to see prices lower because that's when margins tend to be wider. When prices are high, they can't mark up prices as much and often struggle to cover their costs, instead hoping to make money in sales of food, car washes or other goods and services.

"If I didn't have a repair center and a car wash, I'd be in big trouble," he says.

Customers often don't understand that he is a small-business owner, not an extension of "Big Oil." Garrett owns two stations in Northern Virginia and one in Washington, D.C., under the Sunoco name, and has been in business for nine years.

Lately, he says, he and his employees have been receiving a lot of complaints from customers. Although he tries to explain his situation, people don't want to hear it.

"We're the face" of the oil companies, Garrett says. The money the oil companies are making, he says, is "not getting to us."

Pumping gas into his Jeep Grand Cherokee at Garrett's station, Steve McFarland, 52, says he puts the blame on oil companies, arguing that the fact that so many refineries have been shut down in recent months for maintenance suggests they are trying to keep gasoline off the market to lift prices.

"They just created their own shortage," says McFarland of Falls Church, who works the early-morning shift in the produce department at a Safeway grocery store.

Brian Dor, 33, of Arlington, Va., withdrew the nozzle from his Toyota Matrix when the price hit $30 — what he had in his wallet.

Dor works as a contractor for airlines at nearby Ronald Reagan Washington National Airport. He delivers lost luggage to people's homes when their bags turn up. He's been able to recoup some of the increase in gas prices through higher fees, but not all.

"The more gas, the less profit," Dor says.

Garrett can relate.

On a recent morning Garrett was charging $3.11 a gallon for regular. He paid $2.58 a gallon for the gasoline from his distributor. Another 42 cents went to a mishmash of taxes for federal, state, a local transit fee and others miscellaneous taxes. Six cents went to credit card fees.

That left him with approximately 5 cents a gallon in profit. But that doesn't account for his payroll, utilities, rent and other overhead costs that are also increasing.

"My profit is going down from year to year," he says. "The future, I'm a little worried about."

Vince Halsey, 22, of Fort Washington, Md., is also worried. The 22-year-old student and part-time sales manager at a nearby Gold's Gym says it's been hard watching prices increase week after week.

"I put in $30 and it's not even halfway full," he says, filling his car's tank. "It's ridiculous."