Tag: Bite Size Bad News

Bite Size Bad News 7–Gas Stations

 

I saw something rather startling in Northwest Connecticut on the weekend. Each pump at the local gas station had a handlettered sign taped to it, informing customers that all purchases must be paid for in advance. I asked Michael, behind the counter, if he had a lot of customers drive off without paying. “Not anymore,” he deadpanned.

Mind you, this is an area where many people don't lock their houses; hell, some locals don't even have locks. But drive-offs have become a national problem as soaring gas prices in this car-dependent society have more and more people desperate. Up 60% this year in the Lynchberg, VA area. 10% in Pell City, AL. Almost doubled in Bismarck, ND.

This hits gas station owners pretty hard. As a rule they make a profit of 1.5 to 3 cents per gallon — at best — on gasoline sales. So if somebody guns it out of the station after topping off the tank with $60 on the pump, they have sell an extra 2-4,000 gallons to make up for it.

And drive-offs can be controlled by demanding pre-payment, like Michael has been forced to do. Station owners face other, less tractable problems. Soaring fuel prices have meant that more drivers are using credit cards to buy gas, because they simply don't have 50 or 60 bucks in their wallets. On top of an initial transaction fee, the credit card companies charge 2-3 percent. In a low-margin, price-competitive business like selling gasoline, that's a nasty bite. The Robinson Oil Corp. of California, for instance, is no mom and pop operation–they own 34 stations. At six of them, credit card fees are the largest single expense, more than rent or labor!

Perhaps the biggest problem of all for station owners is operating capital–they need more. They are paying twice what they did a year ago to fill their storage tanks, but competition keeps the profit per gallon in the same 1.5 to 3 cent range. They just don't have the dough on hand to handle the increased nut. Suppliers resist giving additional credit or stretching out payment schedules, and, as you may have noticed, banks aren't doing much lending these days.

To rub salt in the wounds, the owners have to listen to jokes about how rich they're getting with the higher prices. But thanks to the magic of the free market, the picture isn't totally gloomy. True, drivers are in a world of hurt. True, the small businesspeople who own most of the gas stations are being stretched beyond their limits. But look on the bright side: Exxon Mobil's take last year was $40.6 billion, the largest corporate profit on record, and they are on track to beat that number this year.

Oh, yeah, company spokespersons announced Monday that Exxon Mobil will be selling all 2,200 of the U.S. gas stations they don't license, but own outright. Just not profitable enough, the company says.

[This is one more in a series of short snapshots of aspects of the economy I've been posting over at Fire on the Mountain under the heading “Bite Size Bad News.”]

Bite Size Bad News 6: The “Staycation”

I know, I know, the last thing you need is another reason to hate Wal-Mart.

But check this out. Last month Wal-Mart management filed with the patent office to scarf up the rights to a neologism (one they had nothing to do with coining, incidentally): “staycation.”

The idea is pretty clear–what with layoffs, inflation, a recession and $4 a gallon gas, many of us aren't going to be doing much vacation traveling this summer, so let's hang around the crib and Have Fun! It's a Staycation!

Rand McNally, the map people, did some polling, via Harris, in April: 57% of American families are trimming their vacation plans this summer, with only 15% of us intending to travel for more than five days. One in ten are canceling vacation plans altogether.

With their trademark application at the US Patent Office still pending, Wal-Mart went ahead yesterday and rolled out a widget you can install on your home computer so that every day you can see a nifty new suggestion for Big Fun on your stay-at-home vacation. Most of them, oddly enough, involve the purchase of a barbecue grill, an “inflatable outdoor movie screen” or some other piece of crap from Wal-Mart. (See the press release at this business news site–I'm not linking to the swine.)

I wonder what they'll come up with if millions of us find ourselves on permanent “staycation” as the economy continues to go pear-shaped. Waterproof cardboard box liners to keep your new residence dry? Lightweight plastic trays to sell apples and pencils from? 2 for 1 squeegees for the entrepeneurially-minded? Have a nice “staycation”…

 

[This is the latest in a series of short looks at the economy under the heading “Bite Size Bad News” I've been posting over at Fire on the Mountain.]

Bite Size Bad News 2 — Auto

[This is the second in a projected series of short posts I have inaugurated over at Fire on the Mountain. They will focus on one or another particular aspect of the economic situation and are designed as a corrective to the “out of sight, out of mind” approach of the mainstream media to the deepening meltdown. Feedback about the idea is solicited.]

The prospect of $4 a gallon gas, falling real incomes and the growing recession are obviously hitting the US auto industry hard. Other recent developments suggest things are going to get appreciably worse for Ford, GM et al, fast.

For one thing, the runup in commodity prices is sinking its teeth in. Netherlands-based AcelorMittal, the world’s largest steel company, has announced a $250-a-ton “surcharge” on steel it has contracted to sell its US customers. Other steelmakers, hit hard by higher raw material and fuel prices, are expected to follow. The spot market price of steel is up 40-50% from last year. (Hot-rolled sheet steel now runs about $1000 per metric ton at spot, to give you a comparison point). Supplies have tightened further as countries like Egypt, China and Brazil cut exports to ensure their domestic supply. (Need I mention that Hugo Ch├ívez is renationalizing Sidor, Venezuela’s largest steelmaker?)

Bite Size Bad News 1–First Mortgages

[This is kind of a test run. I’ve been reading the business press, including blogs, a lot lately. It’s like watching a train wreck in slo-mo. Since I lack both time and theoretical chops to write much in the way of long analyses of the unfolding economic crisis, I propose to occasional short pieces at my home blog, the lefty-politics-with-occasional-music Fire on the Mountain, highlighting one or another tidbit that has caught my attention. here’s the first. Lemme know what you think.]

The weekend edition of the Wall Street Journal provides one more reason the housing crisis isn’t going anyplace soon. It’s not just that the supply of houses for sale is up (to 2.3 million according to Bloomberg News), what with falling sales, foreclosures, overproduction of new units and rising fuel costs making the exurbs look much less attractive. The banks are acting snakebit:

Lenders are demanding higher credit scores, mandating private-mortgage insurance on many more loans, and requiring larger down payments. Fewer first-timers qualify for the house they want, or they’re paying a larger monthly amount to own it.