Feeling the #036;4-a-gallon pinch
Published 12:00 am Saturday, June 14, 2008
HUNTERDALE—The first change in lifestyle came when gasoline jumped above the
$1-a-gallon mark.
The next change came when gas topped the $3 mark.
Now, the unholy is about to occur: Gasoline will top the $4-a-gallon-mark — just as soon as local gas stations catch up with the rest of America. The average price of gas in this country topped $4 a gallon over the weekend.
And for some station owners, they literally won’t know what to figure.
Well, that’s not entirely true. To some customers, station owners will appear to be charging their customers double what’s recorded on the pump. That’s because older gasoline pumps were never made to calculate gas prices above $4 per gallon.
On May 30, Virginia Gov. Tim Kaine announced a “temporary waiver” allowing gasoline retailers to use the practice called half-pricing on older analog pumps which are unable to register a price above $3.99 per gallon.
Half-pricing allows retailers to sell their gasoline on older pumps and suspends enforcement of the requirement that pumps display the full price of motor fuels.
The waiver period runs through Sept. 30, unless amended or rescinded sooner by further executive order, according to a press release from the governor’s office.
Stations that use half-pricing will register the cost of a half-gallon at the pump; they will be required to post an explanation indicating that the total sale price will be double that indicated on the register head. Half-pricing was last used during fuel price spikes after hurricanes Katrina and Rita in 2005.
The older pumps that are still in use in many rural areas were originally made to charge 99 cents per gallon. Then, they were upgraded to reach $2.99. For the next jump in prices, a $25 plastic gear was installed to accurately reflect a purchase of gas that cost up to $3.99.
Now, however, the mechanical or electrical upgrade is going to cost thousands of dollars — and take many weeks — to get the parts, and is making some operators question whether selling gas is such a good idea.
“Oh, it’s going to be confusing,” said Neil Baker of Hunterdale Service Center, whose pumps date to the ’70s and cannot pump gas at more than $3.99 a gallon. When the price rises above that in a few days — weeks, at best — he’ll be charging customers twice what the pump claims is the bill. And Baker isn’t sure what the reaction will be.
“There’s going to be a lot of confusion,” Baker said this week as gas prices inch closer to the $4 level. The “plus” level of gas sold for $3.99 over the weekend; regular sold for $3.89. Diesel sold for well above that, but Baker said his diesel customers understood the concept of half-price sales.
Bubba Carr of Bubba’s Place in Franklin made the upgrade a few weeks ago anticipating the $4-a-gallon rise. He opted for the mechanical computer upgrade, and it cost him “quite a bit of money.” And the profit on gasoline isn’t that great, Carr said.
Those gas pumps can now record gas prices up to $9.99 per gallon.
“I hope we don’t have to do that,” Carr said.
“We just have old, dilapidated pumps,” he said.
The other option to get the full price to appear on the pump is to replace it with new, electric pumps that cost a minimum of $3,000 each. If computer equipment inside the store is needed, or if an upgrade to existing equipment is necessary, the cost rises.
Either way, the items will take more than three months to receive because the heavy demand on the new parts have exceeded demand, said Michael Harrell of Jernigan Oil Co. of Ahoskie, N.C., which supplies Hunterdale Service Center as well as about 40 other stations, mainly in North Carolina.
“It’s not a good situation for some gas stations,” Harrell said.
Baker said the profits on gas sales are pretty tight, although “people think I’m making a killing” selling gas.
He said his profit on gas sales is between $700 and $800 on a $20,000 investment.
Upgrading his pumps will run him “about $12,000 at my expense,” he said.
“It’s going to break fellows like me down,” he said.
“People have asked me what I’m going to do,” said Baker, who took over the garage from his parents in 1996. “I really don’t know yet.”
He said he might get by “doing shop work.”
“Ain’t no money in this now, that’s for sure,” Baker said.
The dilemma is not limited to a few gas station operators.
“With approximately 1,800 analog display pumps still being used by about 840 retailers in Virginia, this is an issue that has an economic impact on every part of the state,” Kaine said. “Retailers must order upgrades to their old pumps, but this exemption will allow consumers to continue purchasing motor fuel at their customary stations while the upgrades are installed.”
Virginia requires that pumps reflect the full price per gallon. To qualify for the waiver, retailers must pursue upgrades and utilize appropriate signage to notify customers.
“Plus,” Baker said, “I might have to send a man out [to the pumps] every time” to explain to customers why the price of gas appears to be so low.
“We will work with industry representatives to ensure that pumps accurately display the current price of motor fuel products,” said Todd Haymore, VDACS Commissioner. “Our inspectors will take half-pricing into account when inspecting stations that have received a waiver allowing the practice. We also will alert consumers to the practice and explain what it means for them at the pump.”
Retailers and consumers will find information on half-pricing on the VDACS Web site at www.vdacs.virginia.gov http://www.vdacs.virginia.gov.