Jul. 22--Jon LaChappelle has weathered energy crises and price spikes in the 40 years he's owned J and D's West Kingston Service, a gas station, convenience store and repair shop in West Kingston.
But the recent jump to $4-a-gallon gasoline has nearly put an end to his gasoline business.
"I wasn't making any money," said LaChappelle, 63, in an interview. "For every gallon of gas I was selling, I was losing eight cents. I'd be 80 cents ahead if you never stopped at all."
Besides unhappy customers, record-high gasoline prices have caused a much more tangible problem for gasoline stations: high credit-card fees.
Since the vast majority of gasoline sales -- up to 90 percent, according to one industry estimate -- are paid by credit cards, gas station owners have been hit with higher fees that sometimes equal or even surpass the station's profit from the sale.
In response, gas retailers have begun offering a discount, some as much as 20 cents a gallon, to customers who pay in cash.
"I'd rather give the money to the customer than to the credit-card company," LaChappelle said. He began offering a cash discount about a month ago.
Yesterday, gasoline prices dropped in Rhode Island, the biggest one-week decline since last August. The average price of regular self-serve was $4.039 a gallon, down 7 cents from last week, according to the state Office of Energy Resources. The average price of diesel fuel was $4.919, unchanged from last week. Home heating oil dropped 16 cents to $4.589 a gallon.
The price drops followed an 11-percent drop in crude oil futures last week. Yesterday, crude for August delivery closed up $2.16, or 1.7 percent, at $131.04 a barrel on the New York Mercantile Exchange.
"Credit-card fees are probably the biggest issue that gas retailers have faced in decades," said Jeff Lenard, spokesman for the National Association of Convenience Stores, or NACS. The Alexandria, Va.-based trade group represents the convenience-store industry, which sells about 79 percent of all gasoline in the United States.
Retailers pay a fee to credit-card companies, based on a percentage of the sale amount, usually about 2.5 percent, Lenard said. So, as the price of gasoline goes up, the amount paid in credit-card fees goes up as well. At $4 a gallon, that amounts to about 10 cents per gallon.
Total credit-card fees paid by the convenience-store industry was $7.6 billion last year, Lenard said, compared to $6.6 billion in 2006. Over the same period, industry profits declined to $3.4 billion in 2007, compared to $4.8 billion in 2006.
Lenard said he didn't have any solid figures on how widespread the trend of offering cash discounts has become. But anecdotal evidence suggests that more and more stations are adopting the practice. A recent two-week road trip he took to visit convenience stores around the country bolstered that impression, he said.
He said expects that the trend will grow. "People will do a lot to save a little," he said.
In Rhode Island, more gas stations have begun offering a cash discount after Attorney General Patrick C. Lynch issued an opinion in which he clarified that it is legal to do so. Lynch, who issued the opinion in response to a request by the Department of Business Regulation, said retailers must display both the cash and credit prices "clearly and conspicuously."
Lynch's opinion and state law don't address debit cards. A. Michael Marques, director of the DBR, told The Journal last week that it is up to the individual gas station owner as to whether a debit card qualifies for a cash discount. Retailers still pay fees on debit cards, though in some cases, those fees may be lower than those paid on credit cards.
Lenard said that major credit-card companies such as Visa and Mastercard do not allow retailers to add a surcharge to use a credit card to pay. But cash discounts, even though they accomplish the same thing, are allowed, he said.
Some customers seem to appreciate the discount.
"I try to save as much money as I can at this point," said Rick Walmsley of Warren, who was buying gas at Iggys Food Mart in Warren last week. On Friday, the Market Street store was selling regular self-serve gasoline for $3.89 a gallon, cash only. That was about 10 to 15 cents below nearby competitors. Before handing over a $100 bill to the station clerk, he laments, "This won't give me half a tank."
"I only do cash-only anyway," said Lori Medeiros of Bristol. "I don't use a credit card. It costs too much money. I'd rather pay for it and get it over with."
Richard Marsland, of Warren, who was pumping $50 worth of diesel fuel into his truck at $4.759 a gallon, said it was not an inconvenience to pay in cash.
"To pay $5 a gallon, that's the inconvenience," he said.
But Christine Richard, of Smithfield, said she has stopped buying gas at Cory's, a gas station on Putnam Pike in Greenville that recently began offering a 10-cent cash discount. On Friday, its credit-card price was $4.16 a gallon.
She viewed the discount the other way around: as an extra charge to pay by credit card.
"I am already paying too much for gas as it is," Richard said by e-mail. "I am not going to pay even more to use my credit card... I don't want or need to carry around that much cash. The whole situation drives me crazy. I now shop around for the cheapest price in my neighborhood, without concern for loyalty."
For LaChappelle, owner of J and D's West Kingston Service, offering a cash discount has allowed him to break even and keep running the gas station part of his business.
The price of regular gas at the self-serve station yesterday was $4.35 a gallon for credit and $4.15 for cash. He said that business is up as more people hear about his cash discount. And more customers are paying in cash. Before he started the discount, about 75 percent would pay with credit card, he said. Now, 50 percent and sometimes 60 percent pay in cash.
"It was a necessity," he said. "The next thing was closing."
"What the hell sense does it make? I might as well stand out there and throw money in the road."
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