Gas subsidized by store goods
GERMANTOWN HILLS — Resident Tom McLaren drives around in a company car, never needing to worry about the price of gas, oil changes or any other maintenance related fees.
But even with such a luxury, he still occasionally fixates on the varying prices at the pump.
"What always amazes me is that gas in the Peoria area is about 20 cents less than in the Chicago suburbs," he said.
McLaren's observation rings true for most of central Illinois. Ricky's Gas and Mart in Germantown Hills charged $3.79 per gallon Feb. 27. The Shell in Peoria charges $.10 less at $3.73.
In the city of Wheaton, a West Chicago suburb, Shell gas station charges $3.83 per gallon. Speedway in the West Chicago city of Naperville charges $3.86 per gallon.
"We actually tend to lose money on gas, but that's OK because we subsidize it with snacks and beverages," Alan Hinduja, Ricky's Gas and Mart owner, said.
Other Feb. 27 gas prices in Woodford County include the Redbird Express Mart in Metamora, which is $3.79 per gallon; the Metamora location of Casey's, also at $3.79 per gallon; and the Metamora Shell — $3.79 per gallon.
Hinduja said he gets many loyal customers that began filing in as soon as the station opened in October 2008. On the other hand, some residents find themselves at Ricky's because of convenience.
"It's the only gas station in town," McLaren said.
Competition is fierce
While Ricky's remains the only station in Germantown Hills, Hinduja said heavy competition still carries on between he and gas stations throughout the tri-county area.
"I'll wait for some gas stations in Peoria to do a survey of competitor's prices, then when they drop their prices below everyone else, I'll drop mine lower than whatever they just changed to," he said. "(Gas station ownership) is very cutthroat and competitive."
Sales tax impact
A Woodford County sales tax increase set to go on the ballot April 9 could end Hinduja's luck. The increase would not raise taxes on items such as cars, trucks, ATVs, boats and RVs; unprepared food and drugs; and farm equipment and farm inputs. But gasoline is not included on that list.
"They say it won't affect groceries and things like that, but it is going to affect gas by about three to 35 cents," he said.
One reason Hinduja finds the tax to be a potentially bad thing is that customers are frugal. He said people pay special attention to the price of gas.
"People are very price sensitive," he said. "And when they see the prices go up like that, they might go somewhere else for their gas. I don't know how it would help the community."
The sales tax increase of 1 percent would hike the tax from 7.25 to 8.25 percent. Many central Illinoisans already pay a heavier sales tax than Woodford County residents.
In Washington, the sales tax rate is 8 percent; East Peoria's is 8 percent; Peoria, 8.25 percent, and so on. Tazewell County residents will also vote on whether to raise the sales tax in their community.
Store goods bring in profit
Auto club AAA stated that the national average for gas as of Feb. 21 was $3.78 — a 15 cent increase in one week. The December retail average cost of gas in the Midwest came out to $3.12 per gallon.
"(Gas prices) only go up because of profit margins," Hinduja said. "Eventually some (gas station owner) says, 'I can't take it anymore,' and they'll raise the prices."
Ricky's profit margin of two cents per gallon in 2011 — when multiplied with the amount of gas sold, at 900,000 gallons — shows that the station made an $18,000 profit from gasoline. That alone could not pay the seven staff members employed at Ricky's.
However, Hinduja said 30 percent of profits needed to carry on the business comes from people buying beverages. That 30 percent does not even include the money made from snacks, cigarettes and other goods provided.
In 2012, Oil Price Information Service stated $479 billion was used toward gasoline in the country. The U.S. Census Bureau determined 313, 914, 040 people lived in the United States in 2012. This shows that a U.S. citizen in 2012 spent about $1,525.90 on gas alone.
Hinduja added that deciding when to raise the price involves a bit of give-and-take. He would not raise the price immediately if the distributor selling him the gas suddenly ups the price by a couple cents.
"If it's one to two cents higher, we'll eat the cost," he said. "But then I still need to make up that loss, so I might raise the price from $3.78 to $3.89 a couple weeks later."
Distributors constantly raise the price on him, leaving him to change on occasion who he buys from. He said even so he will get people changing prices on him fairly consistently.
"I've not seen (distributor's prices) stable for the last four years," he said. "Initially, we went from Growmark Inc. to Circle K."
As distributors raise their expenses, Hinduja said he considers himself lucky that he still remains in business. He said he even sees growth taking place.
"We've actually continued to grow," he said. "It's a fluke in this market."
Hinduja's experience as a gas station owner extends to when Ricky's first opened. Ricky's Gas and Mart is located at 409 Jubilee Lane in Germantown Hills; Casey's in Metamora is located at 219 E. Mt Vernon St.; and the Redbird Express Mart is located at 911 W. Mt Vernon St.