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Saying 'Fill 'er Up' Can Be Costly at the Gas Station

March 01, 1987|DONALD WOUTAT | Times Staff Writer

It was chilly, she was nicely dressed and she thought her car might need oil: reasons enough for Elva Nunez, 25, to pay an extra 30 cents a gallon the other day for the luxury of having someone else fill her car's gasoline tank.

"I've tried doing it myself and I don't like it. I don't like the smell on my hands," the Alhambra woman said. "And I don't know much about cars. I don't mind paying the price if I know the car will get taken care of."

Customers like Nunez are a godsend to gasoline dealers, who, over the last year, have sharply increased the price spread between fuel pumped by customers and that dispensed by attendants.

A recent study by the Los Angeles-based Lundberg Survey found that the gap, which had been slowly widening since the self-serve phenomenon took hold in the mid-1970s, leaped by nearly 40% last year to an average of 29 cents a gallon.

In some cases, premiums of 60 cents a gallon or more have been reported--nearly doubling the overall price--for a service that analysts say costs dealers as little as a nickel per gallon to perform.

Many 'Never Check'

The roughly 20% of motorists who prefer to be pampered at the pumps are a breed that has shown a willingness to pay almost anything to avoid wrestling with smelly, cumbersome gasoline hoses. Although Nunez said she knows what it costs her, dealers say many customers just look the other way.

George Gulesserian, owner of a Chevron station in South Pasadena, did not want a reporter to talk with his full-service customers for fear that it would call their attention to the higher prices. "I don't want them to be reminded. Seventy percent of them never check," Gulesserian said.

In Long Beach, dealer and wholesaler Ron Appel said an occasional customer will pull up to the full-service islands and try to pump his own gas, apparently oblivious to the system of marketing that has emerged over the years.

This might not qualify as price gouging; in most cases the customer voluntarily pays the higher price. It is, however, increasingly a boon to the dealer.

"It's extremely profitable, far more so than is necessary to recover the cost of providing full service," said Scott T. Jones, vice president at Chase Econometrics in Bala-Cynwyd, Pa., a one-time economist at Atlantic Richfield. "They're taking advantage of the fact that the full-service customer is extremely insensitive to price."

The advent of the self-service pump is an important part of the dramatic change that has swept the American gasoline station since oil prices surged in 1973. Longstanding prohibitions on grounds of fire safety were quickly erased and energy-shocked motorists began climbing out of their cars to pump their own gas. For most, it was a minor inconvenience that saved both money and time.

Free Labor

For the oil companies, it was a chance to sell more gasoline with fewer workers. Analysts say the self-service islands can process 30% to 40% more gasoline than the attended islands because each motorist contributes a few moments of free labor and several cars are taken care of at the same time. At the other pumps, cars sit idly waiting for an attendant.

Over the last 14 years, self-serve gasoline has grown to account for about 80% of all sales--and 85% in California. Nervousness about what the marketing experts called the "lady factor" largely vanished: The industry says 70% of women motorists pump their own gas and 85% of men.

The marketplace has made it increasingly worth the trouble. What was a price advantage of about 2 cents a gallon at the self-serve island in 1979 edged up to an average of about 7 1/2 cents a gallon by 1982.

Given new flexibility by the decontrol of gasoline prices that took effect in 1981, gasoline retailers began trimming profit margins at the self-service island and fattening them at full-service pumps, academic researchers said. And as prices overall began to soften at about that time because of declining crude oil prices, the price differential between full- and self-serve gasoline grew to about 21 cents by the end of 1985.

A 29-Cent Gap

Then, according to a recent study by the Lundberg Survey, when the price of crude oil suddenly collapsed a year ago and gasoline prices followed, the full-serve price fell 19% while self-serve prices dropped nearly 30%. By the end of 1986, the gap between full- and self-serve prices stood at an average of 29 cents a gallon.

Jones said that over the years, the effect for the majority of motorists has been to lower prices perhaps 10 cents a gallon below what they would be if there were no self-service islands.

To explain the gap in price between full- and self-serve, dealers sketch a scenario that faintly resembles the way car salesmen and others bargain with consumers: If the dealer comes down $100 on price, he gets it back on the trade-in or some other piece of the transaction. In the end, he collects the same margin.

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