Gas is a zero dollar profit business

[Dion]

Originally Posted by driveway

Then, conceivably, it would be relatively simple for a retailer to lower the cost of their gasoline below that of their competitors as a 'loss leader' drawing business to their store for their uber-profitable chips-and-slurpees trade.

However you never, ever see this. I wonder why?

Do you not remember the gas wars in the deep south when Wally World opened a gas bar?

[driveway]

Originally Posted by Flames in 07

Of course you do. Superstore does it, Cdn Tire does it, Wal mart does it.

And it happens way more in the States, but you don't have to go far to see it here.

And btw it isn't a simple decision for say a macs to sell gas. They need to invest in the tanks you don't see underground, deal with all the safty and environment issues that come along with distributing crude products and manage a business that is very high in turnover.

To be fair, none of those companies operate gas stations here on Vancouver Island (home of Canada's most expensive gas). Also, none of those stations are associated by name with major oil-and-gas companies, they are all retailers who branched out into gasoline, not gasoline sellers who branched out into retail like every Husky, Shell, Petro-Can, and Esso that dot ever other corner in suburbs around the country.

I recognize that there is a difference between Exxon Mobil and the Esso on the corner, but to suggest that the profits of Exxon Mobil ($40 600 000 000 in 2007) and the price of gas at that Esso ($1.20 - $1.25/ litre in Calgary, $1.33/litre in Victoria) are unconnected is a spectacular example of willful ignorance.

[Flames in 07]

Originally Posted by Reggie Dunlop

That would be correct.

Must be quite the spiel then to entice all these new gas retailer franchisees. What's the deal there? Surely these aren't all rubes. Takes a bit of capital to buy one of these joints.

Just so you know, I have no problem with another feller making gobs o' dough or even a comfortable living.

Everyone is getting a cut. Everyone involved gets a piece of the action. Let's not pretend otherwise.

All I'm saying is that you are blurring the 'cut' of the producer and the retailer together, and that is factually incorrect. Simple as that.

If gas is 1.25 / l or 0.45 / l the retialer would make about the same. in fact maybe less at 1.25 because demand is slightly lower so less volume at 3 cents / l

[Flames in 07]

Originally Posted by driveway

To be fair, none of those companies operate gas stations here on Vancouver Island (home of Canada's most expensive gas). Also, none of those stations are associated by name with major oil-and-gas companies, they are all retailers who branched out into gasoline, not gasoline sellers who branched out into retail like every Husky, Shell, Petro-Can, and Esso that dot ever other corner in suburbs around the country.

I recognize that there is a difference between Exxon Mobil and the Esso on the corner, but to suggest that the profits of Exxon Mobil ($40 600 000 000 in 2007) and the price of gas at that Esso ($1.20 - $1.25/ litre in Calgary, $1.33/litre in Victoria) are unconnected is a spectacular example of willful ignorance.

And exactly who is doing that?

[Dion]

Originally Posted by Reggie Dunlop

That would be correct.

Must be quite the spiel then to entice all these new gas retailer franchisees. What's the deal there? Surely these aren't all rubes. Takes a bit of capital to buy one of these joints.

Just so you know, I have no problem with another feller making gobs o' dough or even a comfortable living.

Everyone is getting a cut. Everyone involved gets a piece of the action. Let's not pretend otherwise.

How is my friend making gobs of dough when Esso is the one setting the price at which he must pay for gas he has in his underground tanks?

He sure as hell isn't getting his cut.

[Flames in 07]

Originally Posted by Dion

How is my friend making gobs of dough when Esso is the one setting the price at which he must pay for gas he has in his underground tanks?

He sure as hell isn't getting his cut.

I think people just feel better when they can be mad at someone. I really wish people didn't act like an expert and draw conclusions (and declare everyone as colluders along the way) when they have absolutely no way of understanding the industry and are not willing to learn.

It's an important issue for the planet and everyone insists on remaining ignorant.

Right now, Reggie is doing the equivalent of putting his fingers in his ears and yelling 'la la la'.

Yes big oil companies are making money but retail isn't. That was the point of the OP and people don't want to learn.

[driveway]

Originally Posted by Flames in 07

And exactly who is doing that?

I thought you were, but then you've shifted what you're saying a few times in this thread.

For example, first you said this:

Your problem and many others is assuming the oil companies is represented by the retail signs you see when you drive around.

But then you agreed with this statement:

It's my understanding that no one is buying into these locations. They are owned by Esso et all and the person managing the site is paid a salary

So I'm not sure you even know what you're saying anymore.

[Reggie Dunlop]

Sorry.

I'm just not going to sit here and be told that running a filling station is a losing business proposition and that the wildly fluctuating cost of potato chips (a necessity, I guess to most consumers) drives a thriving industry. It just don't jive.

[Dion]

Originally Posted by Reggie Dunlop

Sorry.

I'm just not going to sit here and be told that running a filling station is a losing business proposition and that the wildly fluctuating cost of potato chips (a necessity, I guess to most consumers) drives a thriving industry. It just don't jive.

Live with your ignorance if you want.

[Reggie Dunlop]

Originally Posted by Flames in 07

Right now, Reggie is doing the equivalent of putting his fingers in his ears and yelling 'la la la'.

So, the point of view of a beleaguered consumer is irrelevant?

Look at the prices and tell me it's not going around.

[Reggie Dunlop]

Originally Posted by Dion

Live with your ignorance if you want.

Running a filling station is a license to print money. Zip in, fill up, pay the minimum wage cashier.

There's not a lot of overhead here. KId sitting at a cashier window. Long past are the days of trusting your car to The Man With The Star™. "Service" is a farce.

And I don't think a lot of consumers bother with convenience items. Hell, you don't even have to walk in anymore. Whip out the card and pay at the pump. A little beep, and off you go -- no human interaction and more importantly no potato chip purchase.

If these places aren't in the business of selling fuel, they're doing a piss-poor job of selling anything else.

[Cowboy89]

Originally Posted by Reggie Dunlop

Running a filling station is a license to print money. Zip in, fill up, pay the minimum wage cashier.

There's not a lot of overhead here. KId sitting at a cashier window. Long past are the days of trusting your car to The Man With The Star™. "Service" is a farce.

And I don't think a lot of consumers bother with convenience items. Hell, you don't even have to walk in anymore. Whip out the card and pay at the pump. A little beep, and off you go -- no human interaction and more importantly no potato chip purchase.

If these places aren't in the business of selling fuel, they're doing a piss-poor job of selling anything else.

How many gas stations do you see without convience store inventory for sale? Now compare that to the number of convience stores that don't sell gasoline. That should give you your answer. You miss the point in that only a very small portion of a gas stations total revenues are their margin. Their overhead is the price they pay for the gas in the first place. The price they get for gas is cancelled out by what they pay for it. What's left over as the profit is off of convience store sales.

[Dan02]

I don't remember where I heard this mentioned but it raises a good point, the oil companies are price takers not price setters. A individual company does not set the price for it's oil, it's price is determined by the market. There is no giant conspiracy with all the big oil companies rigging the price.

As for customers not bothering with convienience items Reggie, I call BS. At the 3 gas stations i frequent i would suggest 50% of the people who walk in don't even buy gas, a even higher ratio at the location with the Timmys and I'd guess 50% of the people who do buy gas also buy something else as well, once again even higher at the location with the Timmys.

Have you seen the shear number of people who just walk in to buy a pack or 2 of smokes? Ever notice why the automated service stations with no convienience store and no one on duty is almost always either empty or has 1 or 2 cars in it. The formula works and it keeps those service stations in business and the cost of gas down.

[Cowboy89]

Petro-Canada did up a good document for their investors outlining some of the key business drivers for their downstream business segment. Some of our more skeptical posters might want to call BS on it but keep in mind it's directed audience is investors who actually want them to make gobs of money. So there's little incentive to downplay margins.

http://www.petro-canada.ca/pdfs/inve..._April2008.pdf

Rack to pump margins are generally very narrow, therefore a priority for Petro-Canada is
to increase revenue from non-petroleum products through leveraging its existing national
asset base. In addition, Petro-Canada continued to advance its position as a retail
market innovator with new offerings such as Neighbours and Glide Autowash.
Neighbours is a new retail concept that combines fresh food and coffee with
convenience products, services and fuel at a single location. Glide Autowash is a
completely re-engineered, high quality car wash offer that allows consumers to choose
between a touchless or cloth wash at the same facility.

[Reggie Dunlop]

Originally Posted by Cowboy89

How many gas stations do you see without convience store inventory for sale?

A few with very little. That's if I take the time to peruse the shelves. Usually I'm in a rush like most commuters and don't purchase such items.

Originally Posted by Cowboy89

Now compare that to the number of convience stores that don't sell gasoline. That should give you your answer.

I don't frequent convenience stores. But I suspose those who do might do so for the expressed purpose. Again. I don't really think I'm outside the norm in this respect.

Originally Posted by Cowboy89

You miss the point in that only a very small portion of a gas stations total revenues are their margin. Their overhead is the price they pay for the gas in the first place. The price they get for gas is cancelled out by what they pay for it. What's left over as the profit is off of convience store sales.

No, I think I got the point, or even better, saw past it.

They might be little guys, but they're still in on the action. They can't help but to be so. Folks just don't linger about at gas stations and make a whole lot of impulse purchases.

[Dion]

Originally Posted by Reggie Dunlop

Running a filling station is a license to print money. Zip in, fill up, pay the minimum wage cashier.

A friend of the family who owns thier indipendant station pays well above minimum wage and offers bonuses to his staff at the end of the year. He does it because he likes to keep his staff and values their efforts in generating profits.

There's not a lot of overhead here. KId sitting at a cashier window. Long past are the days of trusting your car to The Man With The Star™. "Service" is a farce.

So paying someone to manage your books is not a lot of overhead?

How about the people he has running his in store bakery or his deli?

Or the people he pays to manage the place when him and his wife are at thier place in Arizona playing golf for the month of November?

And I don't think a lot of consumers bother with convenience items. Hell, you don't even have to walk in anymore. Whip out the card and pay at the pump. A little beep, and off you go -- no human interaction and more importantly no potato chip purchase.

When construction was going in Douglasdale and nearby communities, workers were lined up out side his store to buy pizza, hamburgers etc from his deli during the lunch hour. Then there's his bakery where they make frresh bread, rolls, etc.

If these places aren't in the business of selling fuel, they're doing a piss-poor job of selling anything else.

You still haven't explained to me how my friend is making his cut when Esso sets the price for the gas he buys to put in his tanks?

If he undercuts the corporate stations he loses money.

[Reggie Dunlop]

Originally Posted by Dion

You still haven't explained to me how my friend is making his cut when Esso sets the price for the gas he buys to put in his tanks?

He buys wholesale, no?

[Dion]

Originally Posted by Reggie Dunlop

He buys wholesale, no?

He buys his gas from Esso.

The price that he pays is no different than the price you see at the pump. He sometimes sells for less to garner more traffic and hopefully gain new customers for his deli and bakery.

[Cowboy89]

Originally Posted by Reggie Dunlop

I don't frequent convenience stores. But I suspose those who do might do so for the expressed purpose. Again. I don't really think I'm outside the norm in this respect.

Translation: You have no idea beyond your own personal experience. Hence, stop trying to insist your anecdotal evidence amounts to the whole truth behind it.

Even if only 10% of people who filled up bought convience items a station could still make enough money to justify it's exiestance while you would still be inside 'the norm' by never buying anything other than gas.

[MelBridgeman]

Originally Posted by Daradon

Wow what did they make you buy and what did you throw out mostly?

Sounds like an awful waste.

I was talking specifically about being forced to buy X amount of product from Tim Hortons and not selling any of it and just throwing it out at 6 am when the new fresh donuts showed up