Fuel Sales a Mystery to Most Consumers: NACS Report

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Fuel Sales a Mystery to Most Consumers: NACS Report

ALEXANDRIA, Va. -- While the vast majority of drivers buy gasoline at least weekly and shop based on a store's specific price, the makeup of the retail locations at which they buy their gasoline -- and how much the stores profit from gasoline sales -- are a mystery to most U.S. consumers, according to a new report released by NACS.

Most consumers believe that major oil companies own and operate the majority of fueling stations in the United States, far above the percentage that actually do. Just over half of consumers (52 percent) say that most of the gasoline retailing locations in the U.S. are owned and operated by one of the major oil companies, when in reality, less than 3 percent of the more than 112,000 convenience stores selling gasoline are, the 2007 NACS Consumer Fuels Report found.

Convenience stores sell an estimated 80 percent of the gas purchased in the U.S., and roughly 60 percent of these stores are one-store operations, owned by independent entrepreneurs who may choose to sell a specific brand of fuel, according to NACS.

"Perhaps, because most gasoline retailers sell a specific brand of fuel and have canopies promoting that brand, consumers assume that these stores are owned by major oil companies," said Greg Parker, NACS vice chairman of research and technology and president of The Parker Cos., which owns 23 c-stores selling branded motor fuels in southeast Georgia.

Consumer misperception regarding who owns gasoline retailing locations is one of several that is common to the industry, the NACS report revealed. Consumers also believe profits made by gasoline retailers are much higher than they actually are.

One in seven consumers (14 percent), aged 18 to 49, believe that retail profits top $1 per gallon. In reality, after factoring in all expenses, including credit card fees, the real average profit per gallon is closer to 1 cent, NACS reports. Overall, one in 11 consumers (9 percent) say gasoline retailers make more than $1 per gallon in profit.

"Consumer misperceptions about who operates stations and how much those stations make on gasoline sales are likely fueled by the strong quarterly profit statements from major oil companies, which are largely driven by 'upstream operations,' such as oil exploration and production," said Parker. "Because more that half of the price of a gallon of gasoline is attributable to the cost of crude oil, gasoline prices tend to move in the same pattern as oil prices, reinforcing consumer misperceptions."

More than one of every three consumers (36 percent) say that gasoline retailers make more per gallon when prices increase, even though overall profit margins tend to shrink because of heightened competition for price-conscious consumers. Earlier findings from the 2007 NACS Consumer Fuels Report found that more than one in four consumers would change their purchasing behavior to save one penny per gallon. Only one in 20 consumers (5 percent) correctly said that profit margins typically decrease as gas prices increase.

Interestingly, consumers' idea of fair profit is actually a lot higher than real profit. In fact, 11 percent of consumers say that at least 50 cents per gallon in profit, after expenses, would be fair, according to the NACS report.

Consumers are adamant about one thing when it comes to fueling and that is price. Nearly two out of three consumers (66 percent) say price is the most important factor when shopping for gasoline. Virtually all consumers reported that they purchase gasoline at least weekly, with 93 percent indicating that they had purchased fuel in the past week and more than one in three (36 percent) indicating that they had purchased gasoline within the previous two days.

The 2007 NACS Consumer Fuels Report is based on 1,238 consumer responses. Data tables, as well as previous consumer data on price sensitivity and other resources, can be found on the NACS Web site at www.nacsonline.com/gaskit2007.

NACS, the association for convenience and petroleum retailing, is an international trade association representing more than 2,200 retail and 1,800 supplier member companies.