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WASHINGTON -- In an effort to clarify the nature of the fuel retailing industry and what impact high crude oil prices have on it, NACS vice president of government relations, John Eichberger, testified before the Senate Committee on Energy and Natural Resources during a hearing titled "Hearing on Crude Oil Prices," yesterday, the association reported.
He was one of six witnesses who were invited to the hearing that investigated the causes and effects of higher crude oil prices, the group stated.
In his testimony, Eichberger explained the makeup of the industry.
"The convenience and petroleum retailing industry is dominated by small, independent companies," he said. "These companies rely on their daily retail sales to generate sufficient revenues to cover their operations and provide a modest profit. … Just as they do not benefit from the corporate revenues generated by the corporations which provide drink and snack items sold inside the store, retailers do not benefit from the revenues generated by their petroleum suppliers."
He also explained that as gas prices rise, higher margins do not follow.
"As gasoline prices have gone up, so have the fees associated with these transactions," said Eichberger in his testimony. "When gasoline prices increased from $2.56 to $3.09, credit card fees increased from an average of 6.4 cents to 7.7 cents per gallon. While this increase may not seem significant, to the retailer this automatically reduces potential profitability. Credit card companies and their banks now make more per gallon sold than does the retailer."
More importantly, he sought further engagement to find solutions.
"The motor fuels market is critical to the economic welfare of the United States, and any legislative or regulatory actions that could disrupt this market, reduce supplies or cause unnecessary costs to the system, and ultimately to the consumer, should be avoided whenever possible," he concluded. "I urge Congress to work with motor fuels retailers and other affected groups to come to a solution that addresses the dynamics of the marketplace and affects long-term change."