Gas stations operate on thin profit margins, with a significant portion of their revenue going towards purchasing fuel from wholesalers. Additionally, they have to cover overhead costs such as rent, utilities, employee wages, and maintenance expenses.
Analyzing Gas Station Profit Margins on a Per Gallon Basis
The most important factor is the profit margin, which is the difference between the cost of the fuel and the price at which the fuel is sold.
In general, gas stations have a relatively low-profit margin on gasoline, usually ranging from 5 to 10 cents per gallon. However, high-volume gas stations might have smaller margins yet generate more profit due to increased sales.
An average gross profit margin for a gas station is 18%. So if the average gas station will make a gross profit of 15% or less per gallon of gas.
Gas stations follow market trends and factor in various costs when setting their fuel prices like wholesale fuel prices, taxes, transportation costs, credit card fees, and expenses associated with maintaining and operating the gas station all contribute to the final price.
Most gas stations make an average net margin of just 1.4% on their fuel. With gas at $3.50 per gallon, they net 3.5 cents profit per gallon sold.
In conclusion, determining how much a gas station makes per gallon involves analyzing various factors, including profit margins, pricing strategies, location, competition, customer behavior, and ancillary services.