There are 122,552 convenience stores selling fuel in the United States, and these retailers sell about 80% of all the fuel purchased in the country. Overall, about 58% of the convenience stores selling fuel are single-store operators—roughly 70,000 stores across the country. These small businesses often don’t have the resources to brand their stores beyond the brand of fuel they sell and promote on their canopies, often leading to consumer misperceptions that they are owned and operated by a major oil company.
Approximately 50% of the fueling outlets in the country have a major oil company brand or carry the brand of another refining company. The remaining 50% sell “unbranded” fuel.” These stations often are owned by companies that have established their own fuel brand (i.e., QuikTrip, 7-Eleven) and purchase fuels either on the open market or via unbranded contracts with a refiner/distributor.
Most of these branded locations are operated by independent entrepreneurs who have signed a supply contract with a particular refiner/distributor to sell a specific brand of fuel, but these retailers do not share in the profit/loss of their suppliers.
Over the past decade, the large, integrated oil companies, have exited the retail business to focus more on resource production and refining operations. ExxonMobil, Shell, BP and ConocoPhillips have either begun or completed the process of selling off their directly operated facilities. As of June 2016, less than 0.3% of all convenience stores selling fuel were owned by one of the five major oil companies.
The retail gross margin, or markup, on a gallon of fuel has averaged 20.0 cents per gallon over the past five years. This margin is lower than most products because fuel retailers know that consumers are incredibly price sensitive and will go somewhere else to save as little as a few cents per gallon. Even with these low margins, retailers still make about 5 cents per gallon after expenses.
To counter slim profit margins for fuels sales, store operators seek to drive profits by growing their in-store sales, especially on food and beverages. Virtually any item inside the store can carry a healthier profit margin than a fill-up at the pump.
The pattern of retail profitability is the opposite of what most consumers think. Due to the volatility in the wholesale price of gasoline and the competitive structure of the market, fuels retailers typically see profitability decrease as prices rise, and increase when prices fall.
Over the course of a year, retail profits (or even losses) on fuels can vary wildly. In some cases, a few great weeks can make up for an otherwise unprofitable year, or vice versa.
In-depth insights on motor fuels and market conditions that affect fuel prices are available in the Fuels Resource Center.