Leave it to the gas station owners

On the weekend of Independence Day, the Biden administration removed its blame from Vladimir Putin for the rising price of petrol to retailers, and especially for the increase in the price of petrol. Saturday, July 2 at noon, President Biden’s Twitter account Investigation

My message to companies that run gas stations and set prices at pumps is simple: this is a time of war and global danger. Reduce the price you are charging at the pump to reflect the price you are paying for the product. And do it now.

On July 1, 2022, the average price of gasoline in the United States was $ 5.34 per gallon. It hit a high of $ 5.47 per gallon two weeks ago, but still a historically high level. On the New York Mercantile Exchange (NYME), gasoline futures rose 57% in 2022. Diesel recently topped $ 5.75 per gallon and now sits at $ 5.73 per gallon, the highest price in decades.

The biggest factor input for both petrol and diesel is the price of oil, which has declined somewhat in the last month. The main reason for the decline in the price of both oil and oil-derived products is the increasing accumulation of economic data which indicates that an expected recession may already occur here. (The first count of US GDP figures for the second quarter will be released on July 28.) But despite recent price declines, West Texas Intermediate (WTI) is up 37 percent in 2022, while Brent crude is up 38 percent.

Misinformation and confusion are both essential skills in politics, but the current administration has pushed the practice to new heights amid rising inflation and the slow pressure of economic growth. The tweet, which was undoubtedly not written by the president but in which he gave his name, begins with a salvo directed at “companies running gas stations”.

In fact, of the estimated 145,000 fuel stations across the United States, less than 5 percent (7250) are owned by refiners who, the president says, “set the price.” But even those small gas stations are not ultimately setting the price of petrol. Prices were first obtained in the global oil market, largely due to the decisions of the Organization of the Petroleum Exporting Countries (OPEC).

In addition, more than 60 percent of retail stations are solely owned by a family or an individual. And although the numbers have undoubtedly changed over the past decade, 2013 census data show that 61 percent of these stations are owned by immigrants. Thus the Democratic administration, which campaigns daily against billionaires and “big companies,” has targeted “mom and pop” stores to attack newcomers to the United States, on which it is clearly left and most Democrats bet their political futures.

As one of the “wars and global dangers” at the present time, it is a matter of opinion as to how much the United States’ interests are tied to the fighters in Southeast Europe. If indeed danger is to be avoided, it is a wise approach to take a much more neutral position than to send billions of taxpayer dollars and 5000 miles of lethal weapons.

But it is only by advising gas station owners to reduce their prices that deep ignorance, deep dishonesty or both are revealed.

In fact, even at current prices, most gas stations only make money by selling petrol or actually lose money. According to IBISWorld, where the average U.S. business profit is just under 8 percent (7.7 percent), the average gas station is less than a quarter of that: 1.4 percent lower. At 3 5.34 per gallon, the average national price of gasoline on Independence Day weekend, a 1.7 percent profit will come to $ 0.09 cents per gallon.

The Hostel estimates that after overhead (labor, utilities, insurance, credit card transaction fees, and so on), a gas station owner receives an order of five to seven cents per gallon. Even selling a few thousand gallons of gasoline a day would cost the owner hundreds of dollars free and clean. Franchise City estimates that gas pumps cost 50

You get $ 30.75 to the oil company, $ 7.00 to the refinery, $ 4.00 to the delivery company, $ 1.25 to the processing and transaction fee, and finally শেষে 1.00 to the end of the chain. And that number can and does change, sometimes even less, as most owners offer an average of ৷ [profit] 1 to 3 cents per gallon net.

Meanwhile, the federal gasoline tax of 18 0.18 cents per gallon provides Washington with a risk-free, earned fee of 3.4 percent per gallon. This is doubly risk-taking for entrepreneurs, most of whom own small businesses and a large portion of whom are immigrants. And it doesn’t take into account state petrol taxes, including the top five in Pennsylvania (7 0.57 per gallon), California ($ 0.51 per gallon), Washington ($ 0.49 per gallon), New Jersey ($ 0.42 per gallon) and Illinois ($ 0.39).

And none of this takes into account other costs and headaches with gas retailing. Small profits come with keeping costs and records related to environmental regulations at the local, state and federal levels. Competition intensifies with the clustering of numerous locations at high-volume transport junctions. The price sensitivity of many drivers is active at a difference of about one cent. Many stations operate 24/7 to maximize revenue. And for those who work as franchisees, the associated fees in exchange for name recognition and some volume discounts can be huge. (Not only do franchisees have to pay a fee to the parent company, they also have to pay the price of their product according to their national promotion, which can reduce profits.)

The terrible business economy of gas station ownership, in fact, is why big oil companies and refiners are not interested in it. And that’s why they’ve reduced their exposure to the consumer-oriented edge of the energy sector for decades. Surprisingly this is a bad financial prospect that has pushed fuel stations to retail food, beverages, cigarettes, cosmetics and a variety of other products that passengers may want or need. All of these products have remarkably high profit margins compared to retail gasoline sales, and many independent, sole proprietorship service stations are the key to their survival.

So why do so many immigrants choose a business with seemingly desperate financial prospects? Trisha Gopal researched that question in Itar a year ago; Please note Biden’s July 2 tweet while reading his explanation:

When I talk to every owner, I realize that the choice of a gas station is always a useful one. When I ask her why they chose a gas station, Angelina Rizzo gives me two answers. The first is what I hear from every restaurant owner I talk to: people need gasoline, so the more people drive, the more likely they are to be customers, and the more likely those customers are to need something to eat. It’s an explanation that I’ve seen and heard all my life is at the root of the same immigrant mentality: look for opportunities, stay on your toes and find ways to always be useful. When we think about why immigrants are so entrepreneurial, the reason is that many of us are first taught to see where we need to be, and then, once we get there, get over it.

Biden also has a dark element of redirecting fault. It is ironic that an administration built on the ideological promise of political correctness and the idea that words should be chosen with the subtlety of surgery would send a messy message to it. Gas station owners, a business community represented by new immigrants to the United States, have often been the target of racist and xenophobic rage. Blaming them for a particularly detrimental aspect of the ongoing rise in inflation is utterly wrong, irresponsible and morally irrational.

No one expects government officials, especially politicians in the profession, to understand this. They have no incentive to take real economic, financial and business details within their fixed, ultra-simplified massive. The Biden administration has an inherent interest in promoting the image of gas station owners as highly compensated corporate executives, led by the income of multinational corporations. And there is no better measure for a political organization beyond concept than a growing mad jump from scapegoat to scapegoat.

Peter C. Earl

Peter C. Earl

Peter C. Earle is an economist and author who joined AIER in 2018. He has previously spent more than 20 years as a trader and analyst at several security firms and hedge funds in the New York metropolitan area, as well as running a gaming and cryptocurrency consultancy.

His research focuses on financial markets, cryptocurrencies, monetary policy-related issues, game economics, and economic measurement issues. He has been quoted in the Wall Street Journal, Bloomberg, Reuters, CNBC, Grants Interest Rate Observer, NPR and numerous other media outlets and publications.

Pete holds an MA in Applied Economics from American University, an MBA (Finance) and a BS in Engineering from the United States Military Academy at West Point. Follow him On Twitter.

Selected publications

“General Institutional Considerations of Blockchain and Emerging Applications” co-authored with David M. Waugh Emerald Handbook on CryptoAsset: Investment Opportunities and Challenges (Forthcoming), edited by Baker, Benedetti, Nickbacht and Smith (2022)

“Operation Warp Speed” co-authored with Edward Escalant Epidemic and freedom (Forthcoming), Raymond J. Edited by March and Ryan M. Young (2022)

In “A Virtual Weaver: Hyperinflation in Diablo III” Invisible Hands in the Virtual World: The Economic Order of Video GamesEdited by Matthew McCaffrey (2021)

Co-author with “Philip W. Magnus” “The Science of Lockdown” The Wall Street Journal (December 2021)

“How does a well-functioning gold standard function?” Co-author with William J. Luther, SSRN (November 2021)

In “Popularist Prophets, Public Prophets: Pied Pipers of Lucre, Then and Now” Financial history (Summer 2021)

In “Boston’s Forgotten Lockdown” American conservative (November 2020)

In “Private Governance and Rules for a Flat World” Creighton Journal of Interdisciplinary Leadership (June 2019)

“The idea of ​​a ‘federal job guarantee’ is expensive, misleading and increasingly popular with Democrats.” The investor’s business is daily (December 2018)

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