By OGJ editors
HOUSTON, June 5 -- Gasoline retailers didn't see windfall profits during the 3-day Memorial Day holiday weekend in the US, but selling gasoline returned to a money-making proposition in the second quarter after many chain retailers and refiners experienced several months of red ink, reported Oil Price Information Service of Lakewood, NJ, in a new study.
As of May 29, the average retail service station was selling unleaded regular at a gross profit margin of about 12¢/gal, said OPIS. Second quarter retail profits were up substantially from the mostly single-digit margins of the first quarter.
Gasoline margins nationwide averaged just 6.7¢/gal during first quarter 2002, down substantially from 10.8¢/gal in 2001.
Hypermarts
But gasoline profits have been negligible in areas featuring big discount retailers known as hypermarts, such as Wal-Mart Stores Inc. of Bentonville, Ark., and Costco Wholesale Corp. of Issaquah, Wash.
Retailers competing against Wal-Mart in the Florida communities of Orlando and Tampa yielded average margins of only 1.6-3.1¢/gal this winter.
Wal-Mart gasoline fueling centers in those areas saw retail prices that averaged 3¢/gal below average wholesale costs, so marketers who matched the big discount stores' numbers saw negative margins on their gasoline sales, OPIS said.
Retailers without Wal-Mart competitors selling gasoline reported much different numbers. For example, retailers in Gainesville, Fla., had average gasoline margins of nearly 14¢/gal during early 2002.
The OPIS study looked at daily pricing of more than 100 Wal-Mart sites operated by Murphy Oil Corp., El Dorado, Ark., for the first quarter of 2002. The study also compared pump prices with wholesale costs for traditional operators of gasoline stations.
Despite negligible margins on gasoline, Murphy CEO Claiborne Deming told shareholders recently that about 110 new Wal-Mart gasoline sites are planned this year in the US. Murphy and Wal-Mart also will partner on new fueling sites in Canada, he said.
Deming called the Wal-Mart stations "a killer application—it's the lowest-cost way, the most efficient way, to deliver [gasoline] to the consumer."