Maine businesses struggle with jump in gas prices

Carter F. McCall/Bangor Daily News

Gas cost $3.87 a gallon on Wednesday at the Irving gas station on Main Road in Hampden. Tightening supply, speculation in the market, and a weak U.S. dollar have sent gas prices to the highest level ever posted during the month of February.

The average price for a gallon of gas in Maine was $3.83 on Wednesday, an increase of 30 cents per gallon in the past month, which is straining the wallets of both gas station owners and consumers.

This week the average cost of gas in the state was a record high for the month of February, according to Gregg Laskoski, a senior petroleum analyst for GasBuddy.com. A year ago, on Feb. 20, 2012, the average price was $3.68 per gallon, according to the website. On Feb. 20, 2011, it was $3.22.

While the gas prices in Maine are high, they’re not as bad as elsewhere in the country.

“As disturbing as [a 30-cent increase] may be to folks in your state, it’s important to understand in other regions the increase is double what you’ve seen in the past month in Maine,” Laskoski told the Bangor Daily News.

For example, gas in Chicago increased more than 60 cents in the last 30 days, and the average price for a gallon of gas in Los Angeles stands at $4.29 a gallon.

“It’s certainly problematic in every part of country,” Laskoski said.

Nationally, the average price for a gallon of gas has increased 45 cents in the past month to $3.72 on Wednesday, the fastest rate of increase since 2005, according to The Washington Post.

While high prices at the pump squeeze consumers, forcing many to make tough budget decisions, businesses also are affected.

Gas stations make very little money on gas, according to Sarah Wardwell, owner of Union Street Citgo in Bangor.

On Wednesday, Wardwell’s station was selling gas for $3.82 per gallon.

“If we’re lucky, we’ll make 10 cents” on every gallon, she said.

However, that’s only if someone pays with cash. If someone uses a credit card, the profit shrinks. If someone uses a Mastercard or Visa, which charge businesses a flat fee plus a percentage of the purchase every time someone uses their card, that shaves about 8 cents off that 10-cent profit, Wardwell said, leaving her with 2 cents for every gallon of gas she sells.

And since the credit card fee is based in part on a percentage of the sale (it’s about 3 percent on average), as the price of gas increases, so do those fees, she said.

An independent gas station owner in Fort Kent said the increasing cost has the potential to seriously affect his business.

“What it means if it keeps up, it means this will put us right out of business,” he said. “Distributors are squeezing the dealers out of here. There’s no profit in gas, and I’m dead serious about it.”

The gas station owner, who declined to give his name for fear of becoming a target of the large distributors, said after deducting credit card fees, he makes next to nothing on the gas.

“Someone along the way are making big bucks,” he said, adding that it’s certainly not the gas stations.

The increase also puts pressure on Maine businesses that rely on fleets of vehicles.

Mark Chamberland, president of R.F. Chamberland in St. Agatha, which has a fleet of 45 trucks that crisscross the eastern United States, said the increase in gas prices isn’t “deadly” to the company, but it does have an impact.

“It’s not harder to do business, but your profit margins are lower, which means you can’t spend that money in the community,” Chamberland said.

Diesel fuel, which Chamberland said was $4.55 a gallon in Madawaska on Tuesday evening, is the company’s largest expense, making up about 39 percent of total costs. That’s an increase from just four years ago, when gas was only 25 percent of the company’s expenses, Chamberland said.

While the increase in gas and diesel prices during this time of year isn’t surprising, it has turned out to be more pronounced, according to Laskoski with GasBuddy.com. There’s usually a jump in price around now as refineries transition between producing two different types of gas, a winter blend and a summer blend. The transition requires some reduction in output. East Coast refineries were operating at 75.9 percent capacity on Feb. 13, he said.

But a combination of additional factors, including tightening supply, the high price of crude oil driven higher by speculation in the market as a result of the strength of the Dow Jones, has made the increase more severe recently.

Crude oil did post its biggest daily fall of the year on Wednesday, Reuters reported.

There’s also another factor that gets less attention, Laskoski said.

“There’s an underlying current here that’s also working against consumers and that’s the weakness of the U.S. dollar,” he said. “Our own federal government favors a weak dollar. The logic behind it is, in doing so — by favoring a weak dollar — they can help reduce the relative values of the $16 trillion in debt that we carry. But the flip side of that coin is when you support a weak dollar it’s extremely detrimental to consumers. It takes more of those dollars to buy that crude oil and for consumers to buy the finished product — the gas at the pump.”

But global commodities markets and monetary policy aren’t Wardwell’s primary focus. She’s just interested in keeping her business going.

“We’re all trying to keep the prices as low as we possibly can,” she said. “It’s just as hard on us as it is on consumers.”

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Comments

DANNY FITZSIMMONS's picture

you need

You need to really pin point those responsible for this price gouging, then imprison them for 10-20 years make an example of them. Maybe it is not your mom and pop stores but most likely the CEO's and CFO's of larger chains. What did this story fail to answer such as the 20 cents per gallon EPA decrease only a month ago, as well as lower crude prices yet the prices climb because of futures and greed by oil dealers. The economy did not go south because of the fall of the dollar this is bogus the dollar did not flop in a record time no Katrina did or rather the scum buckets who gouged the oil market caused the economy to fall into a recession.
Wall street has a large role in this as well as the oil barons who boast AFTER THEIR OUTRAGEOUS SALERIES OF 25 Billion, they know what they are doing too when they shut plants down to cause price increases.
in a Larry King episode one chairman stated that oh the billions in profit is only due to a profit of 5 cents a gallon. And these large profit cycles are needed in order to pay for risky drilling when the following year the same company refused to seek new drilling because the price of oil was falling. Kind of messes up another one of their excuses and saw yet higher returns.
these executives lookout for one thing their pocketbook and the politicians who watch their back. On both parties, oh yeah then there are the subsidies not mentioned here either guess that’s a typo eh?

GARY SAVARD's picture

Tim, correct me if I'm wrong,

Tim, correct me if I'm wrong, but I'm of the opinion that oil pricing is set in the commodities market by speculators that bet on future demand and bid up prices based on those "bets". Any little thing , such as unrest in the Middle East, storms , refinery shut-downs, are catalysts that are used to drive up prices. The sad thing is, these market manipulators never even touch a barrel of oil. Free Markets are a great thing??? Not always.

ERNEST LABBE's picture

Simple facts

Simple facts:

1) Demand fuels price

2) In the sixties hardly family had two cars.

3) How much has our own population grown over the last 50 years?

4) How many single familyy homes are there now compared to then?

5) In many of the third world countries hardly anyone had a car.

6) More demand means higher prices.

Bob White's picture

Are you making excusses for

Are you making excusses for the price increase or are you trying to justify it? Those might be facts but still we dont need to except it. Our people in Washington worry about things that effect the few (sometimes) Nobody can say they are not effected by higher fuel cost they just cant. You can ride a bike you can buy a electric car but at the end of the day you buy something that has been trucked in so the price effects you. Im just saying it doesnt have to be this way.

Bob White's picture

No sir I dont THINK I made it

No sir I dont THINK I made it up I KNOW he said it. during The election they replayed him saying that. Do your home work and you will see. Not that you will believe me and I dont care if you do or dont I have a great command on how oil prices work and Im sure I could carry a very inteligent conversation on how oil prices work.

Bob White's picture

I'm not a person who believe

I'm not a person who believe we need more goverment regulations but why do we regulate milk ,electricity and natural gas prices and we dont regulate oil prices? ( thats not really a question I do know why) Didnt our great leader promise the last election that he would lower gas prices?
Its a simple thing to figure out the president talks about stimulas well you drop the price of gas and diesel and guess what you have a REAL stimulas. People would have more money in their pockets companies would have more money in their pockets and that would mean people would spend more. See very simple.
Let me guess Its the GOP's fault Im sure of that or maybe Bush's fault

TIMOTHY OLEHOWSKI's picture

Are you serious?

When did he promise that? I think you're making things up as you go along. You really don't have a clue how oil pricing works, do you?

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