How do gas stations benefit from oil price movement?

Do they benefit if oil price go up and lose if oil price go down everyday because they store their oil in their stations?

How do they manage their profits with price movement everyday?

2 Responses to “How do gas stations benefit from oil price movement?”

  1. kirk m Says:

    This is a very good question, and you show tremendous insight when you mention the fuel that is stored in their tanks.

    First, taxes are based on every dollar increase in the price of the fuel not per gallon. When the price goes from 1 dollar to 2 then on to 3, the station's owner becomes responsible for the increase in taxes. The profits do increase, however, when the price goes back down, they typically lose money, as you pointed out, due to the prices they have paid for the fuel that is in the ground now. If the price goes up as they are refilling their tanks, they have to hope for several weeks of higher prices or lose profits. It is very difficult to forecast prices over these periods and causes many to sell back to the companies rather than maintain a franchise. Imagine trying to run a business where your product cost you more to buy than you could sell it for. Gas stations go through those cycles monthly due to the prices they pay to bring fuel to market versus the current fuel prices. Typically profits are in the 5-7 cent per gallon range. Fuel prices swing farther than that in just a week, sometimes.

  2. NakedHike Says:

    Actually not even gasoline stations benefit from the nonsense that OPEC wants to put everyone through.

    Gasoline stations are actually neo-grocery stores and vehicle repair shops. They make most of their money off of snacks, mechanical repairs to cars, sodas, drinks, unhealthful burgers, hot dogs and other fast food, etc. The vehicle fuel they sell is just a loss leader.

    This is similar to what happens in regular grocery stores when you see a weekly special of grapes being sold at 89 cents a pound. The store isn't making any money off of those grapes, They are selling them at cost or near cost. The grape specials draw customers in to impulse buy other items, which may have had their prices raised.