Why Gas Station Margins Are Razor Thin

Inc. explains exactly why gas stations are one of the least profitable retail industries in the country.

August 06, 2014

NEW YORK – As part of its weekly niche business report, Inc. magazine partnered with financial information company Sageworks to examine the myth that gas stations are profiting excessively from high gas prices.

As those in the industry already know all too well, very little of the money spent at the pump is going into the pockets of the gas station owner. The Inc. report cites private company financial statements from 2013, showing that the average privately held gas station made only two cents of profit on each dollar of sales, making it part of one of the least profitable retail industries in the country.

With such razor thin margins, gas station operators — many of them single-store operators or small-business owners — have very little room for error. According to the report, 2013’s 2% profit margin was actually the strongest average margin that private gas stations had seen in the past ten years. The average net profit margin for privately held companies across all industries was nearly 7% in 2013, according to data from Sageworks.

Distribution and marketing — costs that include any profits earned by a gas station, transportation of the fuel to the station, advertising and “swipe” fees — account for only 8% of the cost of a gallon, or COGS, based on data from the U.S. Energy Information Administration (EIA).