What Gas Stations Won't Tell You

By Jim Rendon

1. "Good luck finding the best deal." With gas prices hovering at around $3 a gallon since spring, consumers are getting desperate. Some have cut back on driving; others have swapped their gas guzzlers for economy cars. And everyone is shopping around for the cheapest gas. The problem is, drivers often don't know where to find the best deal from day to day.

Most stations are branded — meaning the name of a major oil company hangs out front — and must buy gas from their proprietary company. They can't shop around. With a lock on sales, the oil companies charge each station a different price depending on various factors, such as the station's competition and its location. That means a station can pay as much as 46 cents a gallon more than one down the street, and that cost gets passed along to you.

Faced with such instability, Gainesville, Fla., resident Steven King plans ahead: "If I know I'm going out of town, I try not to buy gas so I can fill up after I leave." King says he can save 10 cents a gallon by purchasing gas on the road. You'd be similarly wise to shop around — with prices constantly in motion, the cheapest gas may not be at the same station every time.

2. "I hate high gas prices too." Stations earn on average between 10 and 15 cents on a gallon of gas. Ironically, they earn the least when prices are highest. As fuel climbs, gas stations must shrink their profit margin to remain competitive, meaning they earn less per gallon than usual. But another big cost during tough times is something they can't do anything about — credit card fees, which add up to about 2.5% of all purchases. When gas is at, say, $2 a gallon, the station pays credit card companies 5 cents a gallon; when gas hits $3, that fee becomes 7.5 cents — more than half the station's entire average profit. Last year gas stations' revenue from fuel grew 25%, while the fees they paid to credit card issuers jumped 40%, to $5.3 billion. "Those credit card fees are miserable for the gas station business," says Mohsen Arabshahi, who owns five Southern California gas stations.

How do station owners make up for lost revenue? "Prices go up like a rocket and come down like a feather," says Richard Gilbert, a professor of economics at UC Berkeley. For several weeks after wholesale prices drop, stations can earn as much as 20 cents a gallon before retail prices are lowered to reflect the change.

3. "My gas isn't better for your car; it's just more expensive." Oil companies spend lots of money explaining why their gas is better than the competition's. Chevron's gas, for example, is fortified with "Techron," and Amoco Ultimate is supposed to save the planet along with your engine. But today more than ever, one gallon of gas is as good as the next.

True, additives help to clean your engine, but what the companies don't tell you is that all gas does so. Since 1994 the government has required that detergents be added to all gasoline to help prevent fuel injectors from clogging. State and local regulators keep a close watch to make sure those standards are met; in Florida inspectors checked 45,000 samples last year to ensure the state's gas supply was up to snuff, and 99% of the time it was. "There's little difference between brand-name gas and any other," says AAA spokesperson Geoff Sundstrom.

What's more, your local Chevron station may sell gas refined by Shell or Exxon Mobil. Suppliers share pipelines, so they all use the same fuel. And the difference between the most expensive brand-name gas and the lowliest gallon of no-brand fuel? Often just a quart of detergent added to an 8,000-gallon tanker truck.

4. "If you're smart, you'll put that debit card away..." Your debit card might be a convenient way to pay for gas, but it's a no-win proposition. When you swipe a debit card at the pump, the bank doesn't know how much money you'll be spending until you've finished pumping. So to make sure you have the funds to cover the purchase, some stations ask banks to automatically set aside some of your money: That amount used to be $20, but with gas prices going up, stations have started asking banks to hold $50, even $100. That means even if you just topped off your tank for $10, you could be out $100 until the station sends over its bulk transactions, which can take up to three days. If your funds are running low, you might end up bouncing a check in the meantime — even though you had the money in your account.

Unfortunately, paying inside with your debit card isn't much of a solution either. Many banks charge their customers between 50 cents and $1 for the privilege of using their debit card in any PIN-based transaction. The American Bankers Association estimates only 13% of consumers pay these fees, but critics say the practice is on the rise and consumers are often unaware of these charges.

5. "...and don't even consider applying for our gas card." When it comes to gasoline credit cards, a little research goes a long way. The good deals are great, but the bad deals are really bad. Similar to store cards issued through retailers, gas cards are riddled with drawbacks, says Curtis Arnold, founder of CardRatings.com. APRs are high, starting above 20%; many don't offer rebates on gas purchases; and they often lack standard protections such as fraud monitoring and zero liability for unauthorized transactions.

What about a Visa or MasterCard affiliated with a gasoline brand like Exxon or BP? They often offer lower interest rates and significant rebates, but limit your ability to shop around. In December 2005, a few months after gas hit $3 a gallon, Justin Andringa of Minneapolis considered a Shell MasterCard with a 15% rebate on gas purchases. But the rebate was temporary; he decided to stick with his Citibank Dividend Platinum Plus card, which gives him a 5% rebate on all gas purchases no matter where he buys it. "I'm a college student," Andringa says. "I need to save money." The deals on these cards are constantly changing. So visit CardRatings.com to find updated information.


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