Rising costs cut into profits
John Saccenti
Sam Cline has owned Jamesburg Gulf for seven years. But, because of the high price of crude oil, he currently has to charge more per gallon of regular gasoline then ever before.
The increase, needed to offset the high prices he currently is paying to get the gasoline, has cut into his business significantly.
"I’m getting less people and they’re buying less amounts (of gasoline)," said Mr. Cline. "It’s hard to explain to some people that it’s not us."
Mr. Cline used to sell about 3,000 gallons of regular gasoline a day. But over the past six to eight weeks, he is averaging 2,300 to 2,400 gallons a day.
Sales of other grades of gasoline also have gone down 20 to 30 percent. Customers who normally used to fill their tanks up now are buying only $10 to $15 worth of a gas at a time. Some customers also are purchasing as little as $2 worth of gas per visit, said Mr. Cline.
However, the increasing price of gasoline has had a less harmful effect at the Mobile station, located at the intersection of Prospect Plains and Half Acre roads. Owner Lew Petrone said he is selling about the same amount of gasoline now he was several months ago. That’s despite an increase of 20 to 30 cents per gallon of regular.
He attributed the fact that the area he is located in is growing, and that new customers are moving into the area everyday.
"It’s a big area, and it’s a growing area. I’m sure we’ve gotten an influx of people in the area from last year," said Mr. Petrone. "From what I’ve seen, the volume hasn’t decreased. People still have to drive."
Mr. Petrone currently charges $1.47 per gallon of regular, $1.57 per gallon of special and $1.65 per gallon of super. Gasoline at Mr. Cline’s cost $1.49 per gallon of regular, $1.59 per gallon of plus, and $1.67 per gallon of premium.
The steady increase in gas prices is due to a meeting held by oil producing countries in March 1999. That’s when OPEC countries collectively decided to cut back on the production of crude oil. The move was made to drive up the price of crude oil.
According to Jonathan Cogan, information specialist for the Energy Information Administration, a branch of the U.S. Department of Energy, the price of crude oil has risen from $10 to $12 dollars per barrel this time last year to $30 this year.
Additionally, the nationwide average price per gallon of regular gasoline rose from $1.02 on March 22, 1999 to $1.27 on Jan. 3, 2000 to $1.53 this month. With the summer vacation months approaching, Mr. Cogan said the price of gasoline is not expected to drop.
"On the short-term forecast, we’re not expecting prices to ease until after the summer," said Mr. Cogan. "We would expect some further easing next year, but for the time being, we’re not expecting any price relief."
Mr. Cogan said gasoline prices could average as high as $1.75 to $1.89 per gallon during the summer. The previous high was set in March 1981, when prices reached $1.42 per gallon of regular gasoline. Given inflation, that price would represent a total price of $2 in 2000, said Mr. Cogan.
But Mr. Cline said he expects increases to level off enough to prevent a repeat of the energy shortage in the mid-1970s, when lines of cars extended out of parking lots and down streets.
"In 1976, when we had a shortage, I was on the other end of the stick. It was tough to get gas and the price was exorbitant," said Mr. Cline. "I remember paying $2 in Tennessee for regular. I don’t think we’ll see $2 for regular. I would be extremely surprised. I’m at $1.49 a gallon and I’d be shocked if it went over $1.60."
Prices of gasoline traditionally increase during the summer, said Mr. Cogan. Gasoline providers traditionally dip into inventories they have built up throughout the year to meet the higher demand, a product of the heavy traveling many do during the summer. However, gasoline inventories this year are much lower than normal.
"Inventory levels look more like they would after the peak season," said Mr. Cogan.