The gasoline supply shortage has been profitable for many dealers because their margin of profit per gallon has jumped 45 percent in the last four months, oil industry executives say.
Even with curtailed supplies and a drop in repair business the higher profit margins, along with curtailed hours and a layoff of help, frequently is enough to ensure higher net takehome pay for dealers, the executives say.
They point to figures supplied by The Lundberg Letter, a respected gasoline retailing publication, showing that dealer profit margins rose from 5.56 cents per gallon in January to 9.57 cents per gallon in April.
The industry executives estimate that in Washington the average dealer -a man who rents his station from and is supplied by a major oil company-has an income between $30,000 and $100,000 a year before taxes.
Dealers themselves are reluctant to say how much they make or whether they are making more during the current shortage, but several said they are not making less.
James Gouldin, who operates three Washington Exxon stations, said, "I'm not in the business to lose money. . . . I'm not going to make money like I did in the last (1973-74) shortage period because I have less gallonage, but I'm going to make money, don't worry."
"For sure not, I haven't made any more money," said Roy Page, head of the Northern Virginia chapter of the Virginia Gasoline Retailers Association and operator of two Exxon stations. But Page added that he has not lost any money.
He said he has laid off 10 of his 20 workers at the two stations. He said he totals $80,000 a year from them.
Page said the average dealer may make $30,000 to $40,000 a year from a single station.
James E. Grady was Exxon's eastern region public relations manager until a few weeks ago when he quit his $60,000-a-year job to become an Exxon dealer in Baltimore.
Grady said that he expects to make more than $100,000 a year at his station, although he added that, "The dealer is better off portrayed as the struggling businessman."
Lundberg statistics for Washington show that the average dealer margin-the difference between what a dealer pays for gas and what he sells it for-on self-serve gasoline during the last four months increased 110 percent to 7.38 cents per gallon on regular, 38 percent to 9.9 cents on unleaded, and 23 percent to 11.57 cents on premium.
Before the current shortages, self-serve regular was priced especially low to attract customers. The dealer made very little on it. Now with customers flocking to the stations, the dealers have raised the price-and their margins-on this product.
Full-service increases for the same period were less, according to Lundberg: 14 percent to 11.79 cents on regular, 10 percent to 12.75 cents on unleaded, and 8 percent to 13.3 cents on premium.
Out of a dealer's profit margin and what he makes on repair work and sales of tires, batteries and accessories, he must pay his overhead-station rent, utilities, labor and so on.
Dealer margins, like the profit margins of the major oil companies, are controlled by the federal government. Each dealer is required by federal law to work out his own allowable maximum price and post it on his pumps.
Until the current supply shortage began, competition was strong among dealers and most were selling at well below their maximum prices and profit margins.
But by March, when it became apparent that the oil companies were curtailing supplies to stations by 5 to 15 percent, most dealers raised their prices to the maximum.
As a result, many dealers began actually making more money-net-while others suffered and began losing money.
Whether a dealer is a winner or loser depends on a complex set of circumstances.
The main winners are dealers who last year were selling high volumes of gasoline on low profit margins. Now they are able at their own discretion to make those margins much bigger without going over the maximum price ceiling set by federal rules. At the same time, they are still receiving relatively large allocations of gasoline under the federal rules.
Small neighborhood stations, on the other hand, are more likely to suffer. Last year-the federal "base period" that determines what they will be allocated in the current shortage-they were selling low volumes at a relatively high profit margin per gallon that put the price of their gas very near their allowable ceiling.
Now their volume has been cut even lower and they can only raise prices a small amount before hitting their ceilings.
"In some locations margins are up two and three times what they were and expenses are down," said Amoco's Washington district manager "Buz" Warfield. He said this means dealers in these locations are making more under the shortage than they were before.
"The average [Amoco] dealer in D.C. makes well over $100,000 a year," Warfield said. Amoco has 174 dealers in the Washington area, where there are about 1,500 stations in all.
Shell executives, with 165 stations here, also said they believe the "average" dealer here makes more than $100,000 a year.
"If a dealer is pumping a million gallons a year and his inside repair business is good he can easily be making $100,000 a year," said an Exxon executive. Exxon has 450 stations here-which is more than any other company operating in the Washington area.
A million gallons a year is about 83,000 a month. The average Exxon station here pumps 61,300 gallons a month, and Exxon executives provided this analysis of what happens to such a station in the current shortage:
At the average January profit margin of 6.56 cents a gallon, the average dealer would have made $4,021 a month from his gasoline sales of 61,300 gallons.
Now, under an allocation of 80 percent of that-the lowest possible allocation-he would make $4,693 from sales of 40,040 gallons, or an increase of $672 in his profit.
However, he would make more if his station were a growing high-volume station. Because of the way the federal allocation rules work, such a station would get 95 percent of its old gallonage, or 58,235 gallons.
That amount, at the new 9.57 profit margin, would yield $5,573 monthly, or $1,552 more profit than the previous higher gallonage sales yielded under a lower margin.
It is not clear how many winners and how many losers there are among dealers. Vic Rasheed of the Greater Washington-Maryland Service Station Association, said that "There may be some" dealers making more under the shortage, but, "They'd be very few. . . . It would be a freak situation."
Charles H. Steckler, a Gulf dealer in Mclean, said he is losing money under the shortage conditions and may be driven out of business.
Steckler prides himself on running a friendly neighborhood station, but said his income last year was only $18,500. His station pumped about 47,000 gallons a month before his supplies were cut 10 percent by Gulf.
Steckler said that a decade ago he was making $35,000 a year from the same station, but that competition has held his prices down over the years while his overhead costs have soared.
This is the point made by dealer associations as they have petitioned the U.S. Department of Energy for an increase in dealer margins. A DOE spokesman said yesterday it is studying the request, which would add several more cents to dealer margins.
James Heizer, executive director of the Virginia Gasoline Retailers Association, said wholesale prices charged to dealers for regular gasoline increased 7.8 cents a gallon on the average during the first quarter this year -a 16.6 percent increase.
But dealer margins haven't increased at all during that period and have only gone up 16.2 percent since 1973, Heizer said-a period during which wholesale gas prices have gone up 191 percent. CAPTION: Picture, Charles Steckler, Gulf dealer in McLean, says he loses money under shortage. By Linda Wheeler - The Washington Post