Gas FAQ

Gas FAQ

• How does a customer know if he is getting the correct volume of gasoline from the pump.

  The Illinois Department of Agriculture inspect pumps annually. The cost of the test is $16.00 per hose or $576.00 for us…another hidden tax. A sticker is applied to the pump indicating compliance. Gas gauges in vehicles are poor references. Often fuel tanks hold more or less than what the car manufacturer says. We seldom hear a customer comment. Volume complaints can be directed to the 800 number on the sticker. The state will ask for pump number, product, etc. If there is a problem they will shut the pump down. Octane testing is not a normal procedure for the annual test. This requires lab testing of a sample.

  Why does the government allow the merger of BP Amoco, then BP Amoco and Arco, Shell and Texaco, and Exxon and Mobil, and not Office Max and Staples?

  Dad gummed if we know.

  How can I minimize fuel usage?

  Follow maintenance schedules for your car. Keep speeds down. Skip the trip. Don’t use the air conditioner unnecessarily. Car pool or share rides. Dump the need for a large vehicle. The advertisers have us convinced that we are not safe unless we are surrounded with 4 tons of SUV. We fuel retailers love SUV’s. For me, I fill two times per week (not an SUV) instead of one. I fool myself into thinking that I use less gas. Remember, the vehicle does not cost money when you fill it with gas. It costs money when you turn the key.

  What’s the deal with ethanol?

  Ethanol is in our fuel for only one reason…tax breaks. The state sales tax is reduced by 20% and the federal motor fuel tax is reduced by 5.4 cents per gallon. The 20% reduction in sales taxes applies to all sales taxes, state, city, and county. This means that the ethanol subsidy is fed by the state and also by any city or county collecting sales tax on gasoline. We suspect that cities and counties have no idea that this subsidy impacts their tax collections. See our links to several websites with lengthy but good discussions regarding ethanol. It should make any taxpayer very angry as this is politics at its worst. We just finished our sales tax return for May 2000. The combined breaks federal and state reduced the tax collections by over $10,000 for May 2000. This was offset by the increased price of ethanol. The government gets less money. Ethanol producers and oil companies pick up the tax savings. Consumers lose two ways because 10% ethanol in gasoline reduces mileage by about 3% and they are footing the tax bill for this subsidy. Politicians win by giving us the false hope that ethanol is a viable alternative fuel.

   

  Download this pdf below and check out our flow chart describing the process of getting ethanol in your tank. You can arrive at your own conclusion regarding the claims that ethanol is a viable form of alterative energy

  How does Illinois compare to other states with respect to fuel taxes?

  Politicians will tell you that the state motor fuel tax is in line with other states. That’s half of the story. Illinois applies sales tax to gasoline. Surrounding states either do not apply sales tax or it is at a lower rate. In addition with the Home Rule in Illinois, local governments can apply sales and motor fuel taxes. This does not happen in surrounding states. Marketing gasoline and diesel fuel near bordering states is difficult or impossible. The table below show taxes in surrounding states. Taxes were in effect 6/1/2000.
  Source http://www.api.org

  Do taxes change when the gas price goes up?

  The sales taxes change. They are based upon a percent of sales, not cents per gallon. For each 13.3 cents the retail gas price goes up the sales taxes go up one cent with fuel not containing ethanol, and one cent for each 19 cent price change for fuel containing ethanol. With fuel price increases the state enjoys a nice windfall. They don’t talk about that much. Sales tax on a $1 gas purchase is a bit less that 7 cents and a $2 gas purchase a bit bit less that 14 cents.

  What does the sales tax apply to?

  It applies to the retail price of gasoline not including the state motor fuel tax (19 cents). The tax is applied to all other taxes included in the selling price of gasoline. Isn’t a tax on tax nice? The crafty folks writing our laws pulled this by calling the sales tax a tax on gross receipts, not a sales tax…pretty clever.

  How much gas do you keep at your station?

  We have three underground storage tanks. The Regular and V-Power tanks hold 12,000 gallons, and the Shell diesel tank holds 10,000 gallons. At most, we have about three days supply in storage.

  Where does your gas come from? Don’t you just call in an order and it’s delivered?

  We buy gasoline 3-4 times per week. It is delivered in transports holding about 9,000 gallons. We can not buy a less than a transport load if we think the price is going down. Circle K delivers to us and they need 24 hours notice. The terminal where most of our fuel comes from is located in Heyworth Illinois. It is about 2 hours away. It would be wonderful if we expected a price increase if we could call and have 20,000 gallons delivered in an hour. It does not work in that fashion. The trucks and time are not available.

  Who sets a dealer’s retail prices?

  The dealer sets his own prices. See the previous question. The reality is that prices are determined indirectly by large companies operating in a free market. We are supplied with gasoline by Circle K. They have several thousand locations. In Peoria, most are BP. They set the prices in their stores. They have a great degree of influence over our prices because exactly the same product we sell is marketed by Circle K in locations a mile or so away. In larger cities this also happens with major oil companies operating locations themselves. Prices are set by the oil company in their retail stores which in turn controls street price. The dealer’s cost is determined by the oil company. In the above example dealer selling price is indirectly determined by the oil company. If the dealer does not follow, he won’t sell any product.

  With these high prices dealers must be making a ton of money.

  Sounds good, but this is false. Dealers are at the bottom of the food chain. We respond to prices posted by competitors. In Peoria there are probably fewer than 5 dealers with individual locations. The market is dominated by businesses like Road Ranger, Thornton, Speedway, and Circle K, with hundreds and even thousands of locations. None of these are dealer operated. Anyone making that accusation is completely out of touch with the facts.

  We have helped Middle Eastern countries. Why don’t they give us a break?

  They own the assets everyone wants. Let’s change the labels and rethink this. In our country banks have money. We have created a safe and secure environment for bankers. Why don’t the bankers give us a break? Same concept, different label.

  Will the prices go down?

  Yes. Energy prices go up and down. Today’s high prices are tomorrow’s glut. Only taxes always go up and stay.

  Oil companies seem like the bad guys. There must be a conspiracy behind all of this. Why doesn’t the government do something about this price situation?

  If there is a conspiracy, we can all participate. All of the oil companies are publicly held corporations. They have generally performed no better than, and in many cases worse than other sectors of the stock market. To participate in these perceived windfalls, one needs to call any stockbroker or visit an online broker and make an investment in an oil company of their choice.

  Gas seems really high compared to other things I buy.

  We have a photo in our customer waiting area with Bob Beachler pumping gas in 1955. The price on the pump was 32.9 cents. At that time postage for a first-class letter was 3 cents. If gasoline had followed the cost of the postage, the price per gallon would be $3.73 today. Energy costs have lagged behind inflation for years.

  What was the highest price ever before the price rises of 2000?

  The highest prices we have ever had were in January of 1981. Unleaded regular was $1.439. At that time we had leaded regular which was a bit cheaper. President Reagan signed decontrol on January 26, 1981. Prices have declined since until the round of increases starting in early 2000. Also, all motor fuel taxes have increased considerably. The city of Peoria has also added a city sales tax and a city motor fuel tax.

  How often do wholesale prices change?

  At the wholesale level, they change daily.

  When price changes happen, all of the locations in Peoria seem to move together. There must be a conspiracy

  All of us in the gasoline business pay nearly the same for products. Often wholesale prices go up and no change happens on the street. Pressure builds. We all take regular price surveys by driving around the area in which we market, sometimes as often as 2 times per day. When a competitor moves, we move. In our location, we can watch Road Ranger out of our window and they tend to lead others in price changes both up and down.

  Why do price changes happen so suddenly?

  Communications on the whole planet are almost instantaneous. Everyone from the oil well to the consumer will fill up on fuel if any event creates an expectation of a price increase. Think about the impact of all of the vehicles in a country going from an average of 3/8 of a tank of fuel to 3/4 of a tank. This can be cause of price spikes. Virtually no event will trigger a sudden price drop which could be as sharp as some price increases.

  If the price goes up and you have gas in your tanks why do you raise prices?

  This is a normal market function. Remember that the reverse happens when the street prices go down. In an ideal situation, all of us including (motorists and retailers) would like a full tank when the price goes up and an empty tank when the prices go down. Obviously, an empty tank is not desirable when either driving a car or when selling gasoline, so we are often caught in the reverse situation with plenty of fuel in our tanks and we must reduce prices to meet competition.

  The taxes on gasoline seem like pennies. What do they add up to?

  Update: We collected $775,984 in total gasoline taxes in 2012.

   

  Calculating the tax revenues on an annual basis for our single location is a real attention-getter. The table below is calculated based on our actual gasoline volume of 1,777,970 gallons in 1999. In 1999 we did not have any fuels containing ethanol. In April 2000 ethanol was added to all of our products for competitive reasons. The table illustrates actual tax collections in 1999 and the tax collections had we marketed with ethanol. Two points are important. The first is the size of tax collections for our location, and the second the size of the tax subsidy taxpayers give away for ethanol. The tax breaks are offset by higher product costs with ethanol. It’s amazing how a few pennies here and there add up. Federal Motor Fuel tax money is used to build and maintain roads. The ethanol subsidy shown in the table below results in less available federal money for road building and maintenance.

   

  The Federal Motor Fuel tax is probably the fairest of any tax in our system. Most of the Federal M.F.T. is spent on roads and highways. Drive more, pay more, or don’t drive, don’t pay. Big vehicles pay more. Fuel sippers pay less.

   

  A typical fill includes about $6.00 to $7.00 in taxes.