Gas prices drive many stations out of business

Credit card fees add to burden, owners say

A window at Sutton Street Service in North Andover showed the reflection of owner Chip McAllister (left) and a customer. The writing on the window says the station no longer sells gas. (Lisa Poole for the Boston Globe)

Add to amateur stock car racers, pleasure boaters, taxi drivers, and workaday commuters a new group suffering from high gas prices: those selling the stuff at more than $4 a gallon.

Dozens of gas stations in Massachusetts have stopped selling gas or shut down, and hundreds more are expected to follow suit because rising costs coupled with crippling credit card fees and fewer customers make it impossible for them to afford the roughly $40,000 it costs to refill their underground tanks, according to the New England Service Station and Repair Association.

"We just couldn't compete anymore," said Chip McAllister, who earlier this month reached the breaking point and shut off the pumps at the North Andover gas station he and his wife, Carol, opened in 1988. The couple said that they were losing $5,000 a month on gas and that it was time to focus on their auto repair business instead. They laid off two attendants and retrained a third to perform auto inspections.

The problem lies in large part with credit cards, industry officials say. Gas stations customarily mark up the price by 8 to 12 cents per gallon, no matter the market conditions. But credit card companies charge a fee of 2 percent to 3 percent per sale. So as the price-per-gallon increases, the gas stations pay a larger share of their profits to credit companies. And these days, more customers are paying with credit cards because few carry the $60 or $70 in cash it costs to fill up, said Paul O'Connell, the New England Service Station and Repair Association's executive director.

"Business people have to make a decision," O'Connell said. "Do you keep losing money day after day, or do you just make a business decision and say it's not worth it?"

Some gas stations are revolting and refusing to accept credit cards. Some are offering a discount of 2 to 3 cents a gallon if the customer pays cash. Many gas station owners, from the Berkshires to Cape Cod, are hurting financially, wondering how much longer they can stay in business as prices spiral steadily upward.

"My volume is down, my margins are way down, and I'm just barely hanging on," said Henry Nazzaro, who has owned North Reading's Best gas station for 35 years. "I'm just barely eking out enough each week to pay the bills."

But at a time when oil companies are reporting record profits, a barrel of crude is selling for nearly $140, and a gallon of unleaded retails for an average of $4.08 in Massachusetts, gas station owners are finding little sympathy from their customers. Many drivers have long assumed that, as prices increase, local gas stations profit.

"I just figured they'd price it at the point where they're making money," said Chris Baker, a 33-year-old medical device salesman from Weymouth who spent $75 to gas up his Infiniti sport utility vehicle in Dorchester last week.

But gas station owners say the oil market is squeezing them in a race to the bottom. Not only are they shelling out more to fill their underground tanks, but many stations also are seeing fewer customers because of the high prices. And the owners say they resist raising prices because their customers will drive to a station that offers less expensive gas, even if the difference is just a cent or two. In their business, they say, every penny counts.

"To be competitive, you can't post 10 or 25 cents more a gallon than your competitor, so it's a very vicious circle for us poor guys, and no one cares," Nazzaro said.

The McAllisters, who sold full-service gas at $4.06 a gallon, said they were losing too many customers to self-serve stations selling for 6 or 7 cents less.

O'Connell said he expects hundreds more of the 2,700 stations in Massachusetts, most of which are independently owned and operated, to close or stop selling gas in the coming months, as prices continue to climb and more customers switch to credit cards instead of cash.

The McAllisters, parents of three, said the shutdown of their pumps in North Andover marked the passing of an era in gas service, when customers were willing to pay a bit more for full serve because they wanted to keep their clothes clean and get the windshield washed.

"It's sad, because this is my life, and we've raised our family through this business, and we're a big part of this community," Chip McAllister said. "All the elderly and longtime customers that are just used to coming in - if I could steal a line from [the television show] 'Cheers' - it was a place where people know your name."

Carl Olson, who owns Karli's Petroleum in Cambridge, said he is fighting to keep his business open despite what he called "the hardest time I've had in my life" making a profit. When Olson opened his station 39 years ago, it cost him $3,000 to fill his underground tank. His most recent shipment cost $38,000. And with business slowing, Olson said, he is not sure how long he can keep his tank full and his pumps running.

"You just have to keep putting more money in and more money in to make a profit, and at what point does the guy say: 'Enough! Enough!' " Olson said.

Michael Levenson can be reached at mlevenson@globe.com.