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Translation:

Can't they just raise prices higher than the Conoco, BP, local chain across the street, and drive away the last remnants of their business, and close up.

At least this way, other franchises, even local or regional ones, will probably buy and re-brand the exxon-Mobil stations, and keep doing business.

but retailing gasoline is such a paper thin margin for the retail franchiser, that it Exxon-Mobil has bigger fish to fry, than worrying about that small node of their entire business.

Oil companies make 4 or 5 cents off of 4$ gasoline, but the franchise retailer probably makes less than 2 cents a gallon (half of one percent or less), and relies on convenience items to turn an overall profit, not gasoline sales.

Some small companies can make a go of it on convenience item profits (be prepared to see those prices go up, too) but it is such a drop in the ocean of a major oil company's operating budget, that it is more of a nuisance to them than it is worth to employ mid or upper management for.

I think we'll see more large oil companies getting out of small franchise gas retailing operations, more being bought up by local francisers (midwest has Casey's, Kum&Go, SwiftStop, etc...) who have much smaller overhead, and can operate on convenience store margins...

and I think we will start to see more closed convenience stores, and gas pumps going fully automated, pay at the pump only, with video surveillance security, and NO other overhead, or maybe just an automated carwash, or something. No operating staff, no convenience-item inventory costs, or heating/cooling an attendant building.

But, I guess we'll see.

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Gas stations don't make money selling gas.

They make money selling cigarettes, lottery tickets, candy, and fast food.

The gas just gets you in the door.

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the amazing profits they have had were just the milking before the slaughter...
The whole thing is going bust and they are getting out while they have a chance to clean up and not loose their new shirts.

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I'm not trying to be an antagonist, but I know of a few guys that have plunked down a large sum of money to buy gas stations that don't have stores, services bays etc! There's got to be something more to it than anyone is reporting!

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Riiiiiight...people need a lesson in elementary business economics.

Oil is a low-margin, ultra high volume business. Look it up if you don't believe me. Their record profits are a result of their enormous revenues.

Oil industry average profit margin = 8.5%
(This is not all that good...average really.)
Hedge fund profit margin = 82%
Casino profit margin = 10.5%

At $4 a gallon, about $.04 - .05 goes to oil company's "massive" profits. $.18 - $.19 goes to the wonderful federal government.

Quite frankly, I own Exxon stock, and if you own any domestic mutual funds odds are pretty good that you own some Exxon stock. As a shareholder, I'd be pretty pissed if they weren't maximizing their profits, even in the face of overwhelming government interference.

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And if you reduce the number of car dealerships you have but don't hurt service, you augment your profitability, no?

I don't understand why you 'gave him a lesson' or so to speak, they may have average profit margins, but it doesn't matter because the point of this move is being more profitable, making him right, no?

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What I don't understand is that the price of oil has doubled in a short period of time. So wouldn't that mean that revenues doubled? And I doubt the operating costs increased as much under that year. So where the extra money?

Correct me if I'm wrong: according to http://finance.yahoo.com/q/is?s=XOM&annual in 2005 Exxon Mobil had a revenue of $370,680,000, so if crude oil prices doubled since then that would mean they could mean for 2008 they could make about 740,000,000. So wouldn't everything above the $232,852,000 (plus whatever the increase is) operating cost be profit? which would be around 500bn? What am I missing?

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sorry about the bad grammar.
"if crude oil prices doubled since then that would mean they could mean for 2008 they could make about 740,000,000."

should read "if crude oil prices doubled since then that would mean they could, for 2008, make about $740,000,000."

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I think their profit isn't a percentile, but a static number... I could however be wrong.

I know the profit margin in Canada provided there isn't a cartel (like the one that was recently exposed) for a station owner is a static amount (of 0.06/0.05 per liter), so that could also apply to the refiner.

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It seems desmo is the one who needs a lesson in elementary business economics.

Uhh, the oil biz ISN'T low margin when compared to other businesses dealing in commodities.

And while oil is a high volume business, it’s not like the vast increase in profits was the result of a similar vast increase in the no. of gallons of gasoline sold in the US (demand for gas in the US has only gone up incrementally the past few years and has actually DIPPED recently).

Pretty much the vast increase of profits by big oil is a result of the vast increase in price they can get for each barrel of oil. desmo’s scenario only accounts for the profit in running gas stations, and NOT the profit from producing barrels of oil - which constitutes BY FAR the biggest CHUNK of the cost of a gallon of gas and in which Exxon is a major player.

And make no mistake – big oil has taken steps to SQUEEZE every possible penny out of the independent gas station owners and franchisees.

Here’s an excellent article in the WashPost -

http://www.washingtonpost.com/wp-dyn/content/article/2008/05/24/AR2008052401961_pf.html

“Every time Sohaila Rezazadeh rings up a sale at her Exxon station on Chain Bridge Road in Oakton, her cash register sends the information to Exxon Mobil's central computers. If she raises the price of gasoline a couple of pennies, chances are that Exxon will raise the wholesale price she pays by the same amount.

Through a password-protected Web portal, Exxon notifies Rezazadeh of wholesale price changes daily. That way the oil giant, which is earning about $3.3 billion a month, fine-tunes the pump prices at the franchise Rezazadeh has owned for 12 years.

Like Rezazadeh, Scott Burnham was struggling to cope with low margins and rising rents. On May 9, he closed his station on scenic Knickerbocker Road in Closter, N.J., and abandoned it to Exxon. In March, Exxon had said it would raise his rent by a third over two years. Burnham tried to line up buyers for the franchise, which he purchased for $475,000 just two years ago. But one backed out, saying that the station would lose money no matter how much gasoline it sold.

"Why is the government giving Exxon subsidies and tax breaks when they're making billions of dollars and when they squeeze every dime they can out of every dealer who made that profit for them?" Burnham said.
Even some of Exxon's successful and loyal dealers complain. Jerry Daggle owns five Exxon stations in Northern Virginia, and even though they have different competitive conditions and prices, "Exxon magically lets me make about 8 cents a gallon" at each one, he said.

Daggle, who has been an Exxon dealer for two decades after working his way up from pumping gas, said he has done well. But he still cannot fathom how the oil company can charge him different wholesale gasoline prices for each of the five Northern Virginia stations he owns. The stations all sell the same Exxon-branded gasoline, delivered from the same terminal in Newington, where it arrives via the same pipeline. Sometimes, Daggle said, it's even dropped off by the same truck and driver hours apart on the same day.

The only thing that's different is the price, which can vary by 35 cents per gallon, Daggle said. "If I could have driven a truck to Gainesville and drive the gas from there to Shirlington, I could have made 50 cents a gallon."

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And I have to wonder if higher gas prices are hurting them more and more. Near where I live, it seems like stations are closing up at a record pace. There are empty stations everywhere you look lately.

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