Where filling stations profit (hint: not gas)

NEW YORK — Gas prices may be sitting near record levels, but the owner of your local gas station quite likely is struggling.

Profit margins on gasoline sales are razor thin. Indeed, some gas stations are losing money on credit-card sales, once the fees are factored in.

How do they stay in business? More and more a gas station’s bread and butter is, well, bread and butter — and the coffee and candy bars it sells. Most of these items generate higher profits than gas.

“Gasoline is a relatively low margin part of what we do,” said Jay Ricker, president of Ricker Oil Co. in Anderson, Ind.

Increasingly, a station owner’s biggest challenge is convincing drivers to step inside the store after they gas up.

“It’s all about trying to sell other things,” said Scott Hartman, president and chief executive of Rutter’s Farm Stores, a York, Pa., company that owns and operates 51 gas stations.

Jeff Lenard, spokesman for the National Association of Convenience Stores, estimates that gasoline accounts for 70 percent of a typical station’s revenues, but only 30 percent of its profits. Paul Fiore, executive director of the Service Station Dealers of America.

Low profit margins are squeezing companies along the length of the gasoline supply chain, from the biggest refiners to the smallest corner stations. Contrary to popular belief, 95 percent of gas stations in the U.S. are independently owned: Their prices and procedures aren’t dictated by a major oil company, even if the station licenses that company’s name.

With crude oil, gasoline’s raw ingredient, soaring to records near $112 earlier this month, up from about $60 a year ago, gas prices are actually struggling to keep up. Crack spreads, the difference between what refiners pay for crude and get for the gasoline they make, have gone negative on some days in recent weeks. That means that in those cases, refiners were losing money making and selling gasoline. In comparison, at one point last spring, crack spreads reached as high as $37 a barrel.

Oil’s rise has been driven by investors snapping up crude futures as a hedge against a falling dollar and inflation. But while gas prices have tried to keep pace, demand for gasoline has fallen, limiting refiners’ pricing power.