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SAN DIEGO -- Historically, independent station owners had the ability to offset their gas prices, which provided a competitive edge against major branded oil companies like Shell and ExxonMobil. The tables have been turned, however, with the majors undercutting the competition by 25 cents or more a gallon resulting in tough times for the underdog.
"From the beginning of this year, we cannot compete," Jamal Jonna, co-owner of the Ultra Gas and Mini-Mart on San Diego's El Cajon Boulevard, told the Union Tribune. "There is no independent guy that can match or beat the brand name."
The price differential comes down to rack inversion, meaning that independent station owners have been paying higher wholesale prices for gasoline than branded dealers. Normally, independent dealers realize profits at 10 or 11 cents per gallon; however, in recent weeks retailers have seen wholesale price increases of 15 or 20 cents per day -- and there's nothing they can do about it.
"I've never seen it this bad," said David Hallack, who owns Emerald Oil of La Mesa, told the Union-Tribune. "I thought [Hurricane] Katrina was bad. But this is a lot worse. For the past six months, we've been getting slaughtered, just killed."
Despite public assumption that big oil companies are realizing windfall profits, wholesale fuel process coupled with rising credit card fees and increased operating costs are changing the industry's topography. Take, for example, ExxonMobil recently announcement to sell its roughly 2,200 company-owned service stations, joining an industry trend by getting out of the retail fuel business.
According to the Union-Tribune, major oil companies now own fewer than 2 percent of California's gas stations -- and less than 5 percent of stations nationwide. With U.S. crude oil prices doubling over the past 12 months, wholesale prices at the rack have often been sharply higher than what branded dealers pay. In this spiking market, every 8,800-gallon tanker truck of gasoline becomes a $35,000 gamble for independent station owners.
"I'm sure every independent is feeling it," said Dave Whitlow, owner of Spirit Gas in Lakeside, told the paper. "We're all pumping 50 percent less than we were a year ago."