1804 Gasoline Thoughts

Sunday, May 11, 2008

I just made a quick run into the village to mail some stuff, and noticed that the gas prices have gone up again. Saturday afternoon I paid $3.89/gal. This evening it ranges from $3.93 to $3.99.

There was a comment on the news a few days ago that more and more people have been using credit cards to pay for gas. The theory was that folks prefer to put off paying as long as possible. I don't think that's the reason. Not entirely, anyway.

I've been mostly paying with a credit card lately, and I pay my entire credit card bills every month, so it has nothing to do with using credit or spreading payments. I do it because more and more stations require that you go inside and pay BEFORE you pump, and I find that a royal pain. I don't know what the total will be, and I'm not going to hand them a handful of money without a receipt, and I don't like having to go back in for change, and I don't like the pump cutting off before the tank is full. So, I use the credit card. It's faster and easier.

The news report went on to say that the use of credit cards is putting smaller gas stations out of business because the credit card companies eat the profit.

Now, this I checked out with two local station owners, and it appears to be accurate, or at least "that's their story and they're sticking to it". The stations make a profit of about $.12 per gallon, regardless of what the pump price is. The credit card companies charge 3% on every purchase. So if you buy a gallon of gas at $4 per gallon, and put it on a credit card, the credit card company charges $.12 to process that purchase, and the station has no profit on the sale. The stations actually have a higher profit when the price is lower. A price over $4 and an increasing use of credit cards spells doom.

Tall Dark 'n Handsome says that they have one or two "drive offs" per day, every day, and they're a small station in a small village, and one of the few that don't require prepayment, because they don't want to anger customers or pay credit card charges. I always pay cash there because I don't have to prepay. They may have to start requiring prepayment, because the driveoffs are likely to increase, and they can't withstand that. They're stuck between a rock and a hard place.

And that's why, when the price of a future delivery is going to go up, the stations will raise their price on the gas already in the ground in anticipation.

So now I have a moral dilemma. Knowing this, do I continue to use a credit card at prepay stations? Doing so might lead to fewer gas stations, and less market competition.
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