Who’s to Blame for Record-high Gas Prices
High Gas Prices are Caused by Record-High Oil Prices
$4.07
$2.30
$1.60
January 2004
January 2006 2
Source: US Government, Energy Information Administration
Today
What Makes Up a Gallon of Gas?
Costs Associated with Selling a Gallon of Gas
Retail Price: $3.77/gallon (May 2008)
Crude Oil
75%
10% 10% 5%
Taxes Refining Distribution/Marketing
Source: US Government, Energy Information Administration (http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp)
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Convenience Stores:
Card Fees Have Caused Concern, But Efficiencies Increased Card Fees as % of Sales
0.98% 5.03% 0.94% 4.43%
Labor Expense as % of Sales
2005
2006
2005
2006
• Card fees declined as a percentage of card sales • Labor efficiencies continued to improve, driven by pay
at the pump and other factors
Note: Card fees as % of card sales were 1.90% in 2006 down from 2.18% in 2005. Source: All data sourced from 2007 State of the Industry, NACS. Card Fees expense and labor expense margin from p. 50, and Total Sales from page 1. Dollar value of card fees calculated based on card fees expense margin and total sales.
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Even the Experts Agree
Oil executives on Capitol Hill in Washington, Wednesday, May 21, 2008, prior to testifying before the Senate Judiciary Committee hearing on oil prices.
Dr. Mark Cooper, Director of Research, Consumer Federation of America: “Without the abuse of market power in the crude oil and refining sectors, the summer price of gasoline would be in the vicinity of $2.00 a gallon rather than heading for $4.00 a gallon nationwide.” John Lowe, Executive Vice President, Exploration & Production, ConocoPhillips: “Crude oil represents over 70 percent of the current cost of gasoline. So higher crude prices are driving higher gasoline prices.”
Stephen Simon, Senior Vice President Exxon Mobil Corporation: “First, the prices Americans pay at the pump reflect the dynamics of an enormous international market for energy ... “
Peter Robertson, Vice Chairman, Chevron Corporation: “Americans feel the brunt of record oil prices not just at the pump. Everything is more expensive. People are concerned about rising costs, and rightly so.”
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Federal Law Allows Cash Discounts - Truth in Lending Act Sec. 1666f
"With respect to credit card which may be used for extensions of credit in sales transactions... the card issuer may not, by contract, or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means rather than use a credit card." “…if such discount is offered to all prospective buyers and its availability is disclosed clearly and conspicuously."
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Consumers Being Duped By Service Stations
"It's a typical bait and switch. You lure them in with an attractive price that could be lower than their competitors, and then you hit them up with harder credit card fees."
– AAA spokeswoman Michele Mount (Good Morning America, ABC News, April 9, 2008)
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Visa and MasterCard Already Answered Calls for Lower Interchange Rates for Gas Retailers…
…and how much of this has been passed along to consumers in the form of lower gas prices?
Visa and MasterCard Interchange Rates Are Disclosed
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Benefits of Electronic Payments
Consumer Benefits Include:
• Get in, Get out: Fast, easy payment at the pump • Shorter lines • Security • Rewards • Financial tracking
Retailer Benefits Include:
• • • • Fast, guaranteed payment Shorter gas lines Higher sales Reduced labor costs • Less cash to manage • Easier accounting • Protections from fraud
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HR5546 May Do More Harm
The experience in Australia is a glimpse of what could happen in the U.S. if this bill passes:
Retailers’ fees went down; they did not pass this savings on to consumers; they pocketed the money to increase their profits. Consumers pay higher prices (increased fees) for card products and receive fewer benefits and rewards. Consumers now pay check-out fees at the POS when they use a card.
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