High gasoline prices put stations in the spotlight

“Getting ripped off at the pump” was the headline for NBC consumer reporter Janice Lieberman’s segment, aired recently on iVillage and on the Today Show.

Lieberman’s opening line: “Okay, how much do you hate filling up your tank these days?” She went on to advise viewers how to check that dispensers were operating properly, and instructed them to notify the local Weights and Measures department if they were not.

High gasoline prices have changed consumers’ overall spending behavior more than any other economic factor and that is particularly true at the pump, where consumers say they will significantly change their purchasing behavior to save as little as one cent per gallon, according to a new report by the National Association of Convenience Stores (NACS). The report examined consumer perceptions and behaviors.

The association included some findings from the 2008 NACS Consumer Fuels Report in a Feb. 2 news release. Those findings are part of the association’s annual “gas price kit,” which examines conditions and trends that could impact gasoline prices. Convenience stores sell more than 80 percent of the gasoline purchased in the United States.

Nearly half of all consumers polled say that high gasoline prices have significantly affected their spending behavior, nearly double that of any other economic concern, according to a survey commissioned by NACS.

The association, in its news release, noted that it annually develops an online gas price kit to explain the variables leading up to the petroleum industry’s transition to summer-blend fuels. This is the second year that NACS also has conducted a national study to examine consumers’ behavior and perceptions related to gas prices.

Consumer concerns over high gasoline prices have significantly changed how consumers shop for gasoline. Today, consumers consider price more important than location by nearly a 5 to 1 margin (73 percent to 16 percent).

Not only will most consumers shop based on price, nearly one in three will inconvenience themselves – ironically, at a convenience store – to save as little as three cents a gallon: 51 percent of consumers said they would take a left-hand turn across a busy intersection and 29 percent would drive 10 minutes out of their way. The average fill-up is in the 10- to nearly 12-gallon range, meaning that consumers say they will significantly change their purchasing behavior to save roughly 35 cents on a $35 fill-up, based on gasoline prices at approximately $3 per gallon. This consumer price sensitivity drove retailer gross margins on fuel, on a percentage basis, to their lowest level ever in 2007.

While most consumers currently indicate that they haven’t significantly changed their driving habits, they do say that if gasoline prices increase they might change their behavior. The mean consumer response was that $3.71 per gallon would make consumers significantly cut back their fuel purchases.

Consumers also think that retailers make considerably more profit than they actually do. When asked how much retailers make in profit – after subtracting costs, including rent, insurance and  all other fees – consumer response averaged 65 cents – more than 60 cents higher than actual retailer profits, which average one to two cents over the course of a year. A stunning 16 percent of those surveyed think that retailers make at least $1 per gallon in profit. Interestingly, while consumers overstated retailer profits, they also thought that a “fair” profit was 59 cents.

While consumers think that retailer profit on a gallon of gasoline is about 22 percent of the cost (it’s actually less than 1 percent) consumers don’t blame retailers for high prices. The corner gas station/convenience store is not perceived as the cause of consumers’ pain. When given nine possible explanations for higher prices, consumers said that gas stations increasing profits was the least important factor. And when asked to pick the main reason why gasoline prices increase, only one in 25 consumers said it was from gas stations profiteering.