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Convenience stores replacing gas stations

Fewer gas stations nationwide may lead  to higher gas prices.

Joe Davis, owner of Pro Automotive in Springboro, has stopped selling gas to concentrate on his auto repair business. The profit margin of gas-to-credit card fees was too high and Davis was losing money, which is one of the reasons he quit selling gas. Davis plans to remove the pumps to expand his auto repair business with four new vehicle service bays.

Teesha McClam/Staff photo Joe Davis, owner of Pro Automotive in Springboro, has stopped selling gas to concentrate on his auto repair business. The profit margin of gas-to-credit card fees was too high and Davis was losing money, which is one of the reasons he quit selling gas. Davis plans to remove the pumps to expand his auto repair business with four new vehicle service bays.

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By Lawrence Budd, Staff Writer 10:23 AM Saturday, November 19, 2011

SPRINGBORO — About seven months ago, Joe Davis stopped selling gasoline at his Sunoco station, Pro Automotive, because he could not turn a profit with the fluctuating fuel prices and other costs.

His decision not only closed a chapter of three generations of his family in the gas station business. It also meant only one retailer was left to sell fuel to motorists at one of Springboro’s main intersections — Central Avenue and Main Street.

Davis’ move follows a national trend that could lead to higher prices at pumps across the nation, according to experts.

Throughout Ohio today, there are about 7,600 gas stations — 1,800 fewer licensed gas retailers than in 2000 and 1,004 less than in 2005, according to Ohio’s Bureau of Underground Storage Tank Regulation.

Without neighborly competition, the remaining gasoline stations are more likely to raise gas prices.

“I can keep my prices higher. I don’t have to compete against anyone. How big of an impact it is depends on how far the nearest competition is from the last man standing,” said Patrick DeHaan, a senior petroleum analyst for gasbuddy.com, a group of local websites offering an online window to retail gasoline prices across the country.

The recent reduction in gas stations in Ohio follows a similar pattern in the United States, though the market is holding steady as convenience stores have replaced the traditional stations and sell gas along with other merchandise.

In the late 1970s, there were 215,000 U.S. gas stations and that dropped to 105,000 in 1994.

“That certainly has been a growing trend across the United States; for the last 10 or 15 years,” DeHaan said.

While gas stations continue to close, the retail gas market actually surged as convenience stores proliferated and big-box retailers began selling gas, according to industry observers.

The number of U.S. convenience stores grew 1.2 percent to 146,341 in 2010, according to the National Association of Convenience Stores/Nielsen TDLinx 2011 Convenience Industry Store Count.

Of the U.S. convenience stores, 117,297 sell fuel, according to NACS. Convenience stores today sell the majority of retail fuel, 80 percent in 2009, according to the association’s most recent figures.

“Convenience stores have continued to evolve from gas stations that happen to sell food to restaurants that happen to sell gas,” according to an association statement.

So far, prices at the pump are affected more by the emergence of convenience stores as the dominant players in the retail market and other factors influencing prices in America and on the global market, DeHaan said.

Next year, some analysts predict record pries at the pump due to rising global demand and export of American supplies, according to a November article in the NACS News.

“Gasoline is highly competitive. It has become a very cutthroat business,” DeHaan said, noting the era of family-owned stations offering gas and repairs was practically over. “Those are all but gone.”

Most buyers will shop within the block for lower prices, but are unlikely to venture beyond 10 blocks, he added.

The absence of alternatives is only part of the pricing equation. State taxes and proximity to fuel terminals also affect prices at the pump. For example, area prices should be lower because retailers can resupply from a regional terminal outside Lebanon, DeHaan said.

For prices to drop further, gas buyers will also have to reduce their demand, DeHaan added.

Still a continued drop in the number of gas retailers could result in increased retail prices, DeHaan concluded.

“Competition keeps the prices down,” he said. “I think the biggest cities would be affected most,”

Since major oil companies, such as BP and Exxon-Mobil, have exited the retail markets, Speedway has emerged as a dominant player, particularly in Ohio, Kentucky and Indiana.

Davis said competing for fuel sales with the Speedway — the remaining station at Central Avenue and Main Street — as well as a nearby United Dairy Farmers store on Central Avenue — was only part of the problem prompting him to stop selling gas.

Davis said he was also motivated by a change in customer preference. “People don’t associate gasoline with auto repair anymore,” he said. “I do auto repair, that’s what I’ve always done.”

His grandfather, Wilbur Davis, operated gas stations in Hazard, Ky., before moving to the Dayton area. His father, Joe Davis, also operated stations in the area. Davis started out selling gas for BP at a West Chester Twp. station, then operated a BP station on Central Avenue, just east of Interstate 75, that was closed by BP, after Davis sold it to his father.

He switched to sell Sunoco after buying the station at Central Avenue and Main Street from BP about six years ago, when the company exited the Ohio and northern Kentucky markets, Davis said. “They shut down all their company operated stores,” he said.

He plans to remove his fuel pumps to make way for more repair bays. “I know I can make a living doing this. I don’t know if I can make a living doing that,” he said.

Davis, who temporarily stopped selling gas when prices rose past $4 a gallon, said he also was motivated finally to exit the retail gas business by an inability to identify a firm profit margin amid fluctuating fuel prices and credit card fees of as much as 3 percent.

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