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Gas prices are justified because of circumstances

June 17, 2012
Brooke Ferns , The Mining Journal

The only way to give the editors of The Mining Journal the break they want on gas prices is to lose money ourselves. Supporting a Keweenaw Bay Indian Community-owned sales tax-free station wouldn't mean that consumers could stick it to oil executives. Consumers would actually be sticking it to their neighbors and our state's public school system, the biggest benefactor of local gasoline sales taxes.

Local gas stations are family-owned companies. We are families who live in the local area, families with kids who go to local schools and families with businesses that pay taxes benefitting all Michigan residents. Local gas station and convenience store owners are about as common a people as you will ever meet. We are not, by any stretch of the imagination, big oil.

Here is the reality, which every owner wishes was an exaggeration. Our gross profit margin on gasoline averages less than 5 percent or 17.5 cents per gallon on gas priced at $3.50 per gallon. Markups on our other products aren't much higher: 6 percent on lottery tickets, 5-12 percent on cigarettes and 9 percent on The Mining Journal that apparently doesn't even care about us.

Article Photos

Brooke Ferns

From that money, every expense must be paid. This includes the business mortgage, employees' wages, insurance, a 2 percent credit card fee, all utilities (electricity, natural gas, water, sewer, garbage, telephone, and internet), property taxes, all licensing fees, repairs and maintenance, community donations (which stations are asked for daily), professional fees for accountants and attorneys, supplies, and countless unexpected costs.

In order to earn a profit, gas station owners rely on volume. This can be accomplished by positioning our businesses in prime (but expensive) locations with heavy traffic counts, effective marketing and a competitive price posted on our large lit signs. Every day, each store is competing to have the lowest price.

I not only check the commodities market constantly to make sure that I'm purchasing fuel at the best possible time (as our cost might fluctuate 5-25 cents per day), I also do price surveys about five times a day to stay aware of my competitors' prices. If my price is a penny higher than that of my competition, I won't do enough business that day to cover my expenses.

Current station owners aren't afraid of a new KBIC gas station's business knowledge, marketing skills or knack for predicting which way oil prices will fluctuate. We worry because the KBIC will have a 6 percent advantage, because it will not be responsible for sales taxes to the state of Michigan if the gas station property is placed into trust. When our gross profit margin is 5 percent, competing with someone that has a 6 percent advantage is impossible if we expect to cover our expenses.

The KBIC has used its 6 percent advantage at The Pines in Baraga, which not surprisingly has forced competitors to lower their prices to stay competitive.

Some people say that if the arguments presented by UPPA were valid, we'd see more store closings in Baraga County. However, larger chains try to keep their stores open by strictly reducing their costs of operation, including labor costs, to compensate for the low or nonexistent profit in gasoline sales. Single-store owners must be especially creative to stay open. For one L'Anse station, all of the profits from its Subway business have been used in an attempt to keep the gas station in business.

This devastation would also spread to our local schools. A KBIC tax-free station in Marquette Township could remove more than $6 million from the state's budget each year. Since the sales taxes collected at our gas stations fund education, our state education fund stands to lose $4.4 million annually. We challenge the KBIC to release The Pines' sales tax refunds so that The Mining Journal can share with all of its readers what kind of losses they can anticipate from a station in our backyard.

Yes, we all want cheaper gas. But taking it from our young people's education is not right. The township will also miss out on property tax dollars from the 3 Amigos property should it pass into trust.

Apparently, shop local and children first are no longer important values at The Mining Journal. If this sales tax-free station is allowed to open, local businesses will be devastated and millions will be taken from the education fund each year for the sake of cheap gas.

Shame on me for wanting a small profit from the businesses that I work tirelessly for and attempting to save the jobs of the 40 people I employ. I think The Mining Journal needs to reevaluate its position on who is really being greedy at this point.

Editor's note: Brooke Ferns is president of the Upper Peninsula Petroleum Assciation, an organization of 35 members who own 90 tax-paying retail stations employing approximately 800 Michigan residents.

 
 

 

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