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RANCHO RESORT
MAINTANANCE POSITION

You aren't the only one losing money at the gas pumps these days.

The same high prices that gave the top five oil companies $16.5 billion in profits in the first three months of this year are causing losses at gas stations, especially in Arizona, and particularly in Tucson.

For the week of May 2 to May 6, the average loss for owners of retail gasoline stores in Tucson was 10.8 cents per gallon, said AAA spokeswoman Yvette Lopez.

Out of 39 markets in the Southwest — including cities in Arizona, New Mexico, Texas and Oklahoma — Tucson has the dubious honor of being the worst for retailer losses at the pump. The Phoenix area was second-worst with a 8.9-cent loss per gallon.

"When the price goes up, it hurts us," said Lee Jestings, co-owner of the FastLane Chevron station at the northeast corner of North Swan Road and East Camp Lowell Drive.

His station is one of the busiest Chevrons in Tucson, yet his gross sales have declined by 15 percent since gas prices began their steady upward climb a few months ago, he said.

The situation is a reversal from last year, after Hurricane Katrina, when customers complained of price-gouging, and the state Attorney General's Office got hundreds of complaints.

In a report released last month, Attorney General Terry Goddard said his office had found no evidence of illegal activity in gas pricing, but that Arizona stations had been quick to raise prices after the hurricane struck but slow to lower them when conditions eased.

In fact, the three-year average profit for state gas retailers from 2003 through 2005 was 12.5 cents per gallon, according to AAA. But the losses have grown as prices rise, from losses of 1.5 cents per gallon a month ago to 6.7 cents per gallon the last week of April, Lopez added.

While retailers can reap profits in other periods, the current rise in the price of gas is benefiting the players further up the supply chain — producers of crude oil and refiners and distributors of fuel, Lopez said.

As the local face of the oil companies, gas retailers often bear the brunt of customer frustrations at prices, but they have relatively little to do with the price. The price is typically set by wholesalers, but in a time of rising prices, competition keeps retailers from charging enough to cover costs.

"That's the first guy everybody points the finger at when the prices are this high," said Luz Rubio, executive director of the Automotive Service Association, formerly the Service Station Dealers of Arizona. In reality, "I can tell you that for a lot of these independent retailers, gasoline is more of a loss leader."

Products labeled a loss leader are those offered at a discount, generally below the seller's cost, in hopes the business will attract customers to its other products and services. But with the rise in gas prices, retailers are now seeing a decline in those more profitable products, too.

"They're not selling as much in their convenience stores because people don't have the extra dollars to buy Twinkies, or a soda or whatever because they're using up their money on gas," Rubio said.

A soda sounded pretty good to Joshua Baldwin, a customer Friday afternoon at the Union Gas Station at East 29th Street and South Swan Road. After fueling up his old red Honda CRX with his remaining $5.60, Baldwin said he would have bought a soda if he had some extra cash.

Convenience-store owners aren't the only ones beginning to feel the pinch. Frito-Lay route representative John Umstott notices a hit in his sales, he said, anytime the price of gas goes up by more than a nickel.

Independent retailers — branded and unbranded — account for more than 90 percent of the convenience stores that sell gasoline, according to the National Association of Convenience Stores. In fact, as of August 2005, only 2.6 percent of the convenience stores selling gas nationwide were owned and operated by one of the five major oil companies, Chevron Corp., Royal Dutch Shell, ConocoPhillips, Exxon Mobil Corp. and BP.

Of the independents, about 55 percent are one-store operations owned by a single business owner or a mom-and-pop shop, who may or may not contract with one or more of the oil companies to exclusively buy and sell their brand of gas.

The plight of gas retailers and consumers in the West is the result of a supply of gasoline that is tighter and more vulnerable to product shortages and price spikes than in other areas, Goddard wrote in a report released in late April. Arizona is stuck in an "especially precarious position," with no refineries and dependent upon just two pipelines — one from Texas that goes through Tucson to Maricopa County, and the other from California to the Phoenix area.

The state's population growth has aggravated the problem, as the demand for gasoline has increased 36 percent over the last decade, the report states.

To pull customers to their locations, owners such as Jestings are adding more amenities and hoping they'll help offset their losses on gas. On Friday, Jestings launched his FastFlick kiosk — a 24-hour DVD rental service stocked with 500 new-release movies that also offers a monthly subscription service.

On StarNet Hundreds of gas station pumps in Arizona give you less than you pay for. Search the database for infractions in your ZIP code at azstarnet.com/ gaspump