Local Gas Prices Are Not Putting On The Brakes

By Nancy K. Crevier

If your gasoline bill has your hair standing on end and it seems that you are shelling out more this month than last month to fill your vehicle, you are not alone. The cost of gasoline in New England is more than 60 cents a gallon higher than in August of 2004, and 15 of those cents jumped on board just this past month.

Commuters, travelers, and businesspeople are feeling the pinch as gas prices hurdle over price barriers set in previous years. Consumers are looking for the answer to the question: When is it going to­ stop?

At the Citgo station on Church Hill Road in Newtown, manager Ross Kinkade hears all the complaints.

“I gotta change my driving habits.”

“But they don’t,” says Mr Kinkade.

“I gotta get rid of this big car.”

“But then here come the big SUVs,” he laments.

It is not unusual these days to see $80 or $90 fill-ups for the Suburbans and Escalades that pull up to the pumps there. Despite that, this gas station manager has not seen a significant downturn in gasoline sales. “Sales are static,” he says, surmising that Citgo’s prices, often six to eight cents lower than other area gas stations, and being a full-service station, makes the small roadside business attractive to customers.

Jay Patel, Mukesh Patel, and Chand Patel are partners in the Mobil and Shell stations located off of Exit 10 in Newtown, also on Church Hill Road. Jay has operated the Mobil since 1999 with Chand and Mukesh, and the Shell station since 2000 with Mukesh. They have seen prices rise and fall dramatically over the years, but even they are amazed at the leap prices have taken in recent days.

“There is no rhyme or reason,” says Jay. The parent companies pass on the price increases to the retailer, trying to get what the market dictates. “Retailers,” he says, “get squeezed because you can’t pass on cost quickly enough.”

Your local gas station operator is not getting rich as gas prices soar. Mukesh explains, “You have to watch what the ‘street’ is doing. There is a profit margin of between 5 and 12 cents. That margin doesn’t go up with the gas increase.”

For retailers like the Patel partners, that means that they need to put out more money to the parent company to participate, but the return is less.

There are many other factors that affect the costs at the pump, say Mukesh and Jay. The large companies have what is called “zone pricing,” meaning that what the market bears in one area may differ from that of another only a few miles away. Higher local taxes play a part in the cost of gas in Newtown, and gas stations all over the state have been affected by a state gross excise tax increase of one percent that took effect in July. And like any other business, gas companies will continue to try to get what they can out of the market.

Gene Guilford, executive director of Independent Connecticut Petroleum Association confirms that the station owner is the guy in the middle taking the hit. “Of a gas price of, say, $2.50, state and federal tax is 50 cents a gallon.” By the time the owner finishes paying for taxes, overhead, payroll and supplies, he says, “The station owner gets about two cents a gallon.” What is unfortunate, he says, is that frustrated consumers vent their anger at the gas station owners — the guy who gets the least amount of money.

With Shell and Mobil stations located so close to the highway, Mekush, Chand and Jay are conscious of people’s driving habits. What they are noticing this summer is that the number of travelers is down, as is the volume of gas sold.

“People are shopping around,” says Mekush. “The consumer has become more conscious of how much they travel, how they are doing chores.”

The gas stations’ locations also would seem to make them more vulnerable to “drive-offs,” people filling up their cars with high-cost fuel, and then driving away without paying. But surprisingly, this is a rare occurrence at either station. They attribute this to the fact that while the gas stations are near the highway, neither Shell nor Mobil is “easy in or easy out.” Employees trained to watch, as well as Mobil’s prepay policy, prevent drive-offs, Jay and Mekush believe.

As prices leapfrog from day to day, Danny Amaral of Amaral Motors on South Main Street, has witnessed increased occasions of drive-offs. “Believe it or not, it happens. If they pull a van on the inside of the pumps, you can’t see. You have to go out and keep an eye on the pumps. Trustworthy customers aren’t going to beat you,” he adds.

Amaral Motors, a family owned business going on three generations, is a Chrysler dealer as well as a gas service station, so Mr Amaral has had ample opportunity to see a lot of trends not only in gas pricing over the years, but also in car sales.

“What’s noticeable is the type of cars people want to trade in,” he says. “Big SUVs, Explorers, vehicles like that. The market is just pulled out from under them.”

To the sporadic customer who carps about the high price of gas, Mr Amaral advises, “It’s available, even though it costs you more. I remember the lines. [Low productivity and an oil embargo in the 70s created gas shortages that resulted in long lines at the gas pumps.] You can buy all you want, but it’s expensive.”

Prices are going to keep on rising for the next few years, predict Jay and Mukesh Patel, but Jay suggests that there are steps consumers can take to counteract this.

“If everyone in the US cut back two — just two — gallons a week, it would affect the cost. It’s supply and demand.”

Laurie and Jim Borst of Newtown would agree with Jay Patel. The Borsts appreciate their 1995 Hyundai Accent that Jim drives to Plainville every day, more so this summer than any other. Jim, a project manager for Gems Sensors, gets around 36 miles to the gallon on a ride that takes 45 minutes — “On a good day.”

“There’s been a rise in the monthly bill,” notes Laurie, “but we’re really happy that it [the Hyundai] is good on gas.”

The Hyundai’s fill-up has gone from $12 to $17 in the past few months, she says, but that is small compared to what it costs to fill up her Chevy Tracker, a mini-SUV; $32 gets her what $24 did at the gas pump just a couple of months earlier. “I’ve been thinking about getting a little motorcycle,” she says, only half-joking. “I’m only four miles from work.”

On the other hand, Dave Andreotta, owner of Land and Sea, with offices located in Newtown, bought a Sequoia SUV in March, not anticipating the huge jump gasoline prices would take. Land and Sea is an importer and distributor of small gift items.

“I need the vehicle for work,” he says. “I use it for personal use, too, but I need it to transport merchandise to trade shows, and to return merchandise to our Long Island warehouse.”

Last month’s gas bill really threw him for a loop, though. “I saw the bill and thought, ‘What’s going on here?’ I called my bookkeeper and she checked the bill. It was right — $412 dollars last month.” Previous bills were 30 percent less than that, Mr Andreotta estimates. “I still want my big car, but I don’t want to get 15 miles to the gallon. For me to take action, it would have to go up, though; I don’t know, four or five dollars a gallon, I guess.”

Other aspects of his business are affected by the higher cost of gas, says Mr Andreotta. He observes that a plane ticket to the Atlanta trade show he recently attended cost him nearly $500, when in the past he has been able to find a fare around $275.

His business will feel the impact of rising prices, too, he is afraid. “I’m a little nervous about it, but there’s not much I can do about it. My items are gift items, so as people have less discretionary income, it affects my business. I have to convince people to buy gifts instead of milk,” he jokes. “That’s it. My new campaign: ‘Get Gift.’”

Gasoline prices also impinge on the business of running a town. Newtown maintains one centralized location for fueling town vehicles. Buses, ambulances, police cars, fire trucks, and town trucks use between 20,000 and 30,000 gallons of gasoline and diesel fuel each month, says Fred Hurley, director of public works. The price the town pays is a set fee over the New Haven Harbor price of fuel as it enters Connecticut, and at wholesale is less than the consumer pays at a retail pump. Even so, he says, the base price has doubled in the last two to three years.

“In 2003 to 2004, we paid 90 cents a gallon. In ‘04-‘05 we paid $1.80. Recently we paid $2.15,” he says, explaining that while the department sets a floor price, all the town can do is try to average the high and low prices.

Because most of the fuel consumption used by Newtown vehicles is for emergency purposes, there is not a lot that can be done to economize as prices creep upward. Snowstorms are the wild card each year, too. When Newtown gets a lot of snow, more trucks have to go out, and more fuel is burned. Likewise, years with less snowfall mean lower fuel costs.

Small steps are taken to offset the higher operational costs, though. Says Mr Hurley, “We don’t have five trucks going to a job when you can use three. We have replaced small trucks from ones that run on gas to diesel. Right now, diesel fuel, at least wholesale, is less expensive.”

He adds, “Buses have to run. They’re going to go the same number of miles no matter what the price of gas is.”

So, what are the gas prices going to do next?

Says Citgo station manager Ross Kinkade ruefully, “If I knew, I’d be sitting on a beach in the Bahamas.”