Poor Profitability Caused Closure Of Over 3,000 Gas Stations In 2007

Washington, D.C. (AHN) - The reduction in driving by American motorists has resulted to a 1 percent drop in demand for gasoline, cutting further the profit margins of U.S. refiners and retailers. The cut in gasoline consumption kept high pump prices from further escalating.

The combined reduction in demand and high oil prices has limited gas station owner profits to $0.12 a gallon, an amount sufficient only to cover operating cost, according to Jeff Lenard of the Association for Convenience and Petroleum Retailing. Because of the poor profitability, over 3,000 gas stations shut down in 2007, the highest number since 2001.

Even refiners' margin has tumbled down to $261 million for the first quarter of 2008 from $1.1 billion for the same period in 2007, observed Aaron Brady, oil market expert of the Cambridge Energy Research Associates.

What help keeps retailers operations financially viable were the sales of their convenience stores, particularly packaged beverages, hot coffee and food. Gasoline comprises 71 percent of convenience store revenues, but accounts for only 34 percent of gross profits.

Motorists continued to cut back on their fuel consumption. For the week to June 20, gas consumption went down by 5 percent from a peak of 21.3 million barrels a day, data from the Energy Department said.

The reduction in fuel demand has caused the cut in price of oil by over $2 a barrel as crude oil traded below $135 per barrel on Thursday.