Business: Singing the energy crisis blues

04/19/2011 5:22 AM |

BETH YOUNG PHOTO | Ahmer Ilahi, who owns the Shamrock gas station on Route 24 in Riverside, says that gas retailers are taking home less and less of the profit that oil companies make on the skyrocketing price of gas.

As the price of regular gas hits $4 per gallon this week, business owners all over the North Fork are staring head-on into an economic reality that promises to cut into their profits.

Amar Ilahi

Amar Ilahi owns three gas stations in Riverside. Two are Valero stations and one is called Shamrock, which is a Valero subsidiary. Each of those stations routinely have among the lowest gas prices in the Riverhead area.

“It’s hitting everybody; every time the price goes up, the gas station owners make less money,” he said last week, after the price at his station had just climbed to $3.95. “Gas is such a necessity. The more people spend on gas, the less they spend on other things and unemployment is still 8 or 9 percent. It’s affecting small-business people, every aspect of the economy.”

Mr. Ilahi was raised in Pakistan but moved to the U.S. 15 years ago to chase the American dream. He said that, because of the slim profit margin on low-cost gasoline, he needs to bring in revenue from the mini-mart at his gas station. But his suppliers for the mini-marts are now tacking on a fuel surcharge every time they make a delivery.

“We reduce our prices to drive business. We have low prices and we want to be competitive,” he said. “But the gas stations can only absorb it to a certain extent. It’s going to hit $4 very soon. It’s only a matter of four cents. Once the summer driving season hits, the news is that it’s going to be $5 but you can’t predict that; that’s just analysts. It’s not the gas companies, it’s the uncertainty in the Middle East.”

Keith and Brian Lewin

Keith and Brian Lewin own Lewin Medical Supply on Oliver Street, near Route 58 in Riverhead. They have three vans on the road eight hours a day delivering medical supplies to hospitals and medical offices.

“Everybody wants their products delivered, and there’s such a small markup that fuel prices are eating up the profit. There are some products that we don’t make money on already,” said Keith.

The brothers pay their gasoline bills with a corporate credit card. They were shocked to see the balance on the card hit $6,000 for gasoline this month.

Brian said he’d just filled up one of their diesel vans for $4.35 per gallon on Friday morning.

“No one’s reimbursing us on fuel, and our insurance reimbursements are down,” he said.

Harry Samon

Harry Samon, director of finance at Honda of Riverhead on Pulaski Street, said he can already see signs that what happened to his business when gas prices spiked in 2008 is happening again.

“It absolutely has affected us, but in a positive way,” he said, adding that the company is doing brisk business in motorcycles with smaller engine bores, under 750cc. He said those bikes get between 60 and 70 miles per gallon, while some of the smaller scooters that he’s begun to stock get as much as 100 miles per gallon.

“Where it hurts me is watercraft more than anything,” he said. In the summer, one third of the business usually comes from personal watercraft, and he expects that to go down this year.

Mr. Samon has decided to carry more scooters.

“Three to four years ago, I ordered heavy and I finally got rid of the inventory. Now I’m ordering heavy again,” he said.

Andrew Galasso

The sales manager of Larry’s Lighthouse Marina in Aquebogue, Andrew Galasso, said that this year’s high gas prices come just after the marina was required by the Suffolk County Health Department to rip out its old gas storage tanks and put in new, double-walled tanks at its fuel dock.

The marina will be paying for that upgrade for the next 20 years, he said. On top of that, boaters pay an extra 50 cents per gallon in taxes over the cost of the same fuel at gas stations. Mr. Galasso expects boaters to be visiting the gas dock less frequently this season.

“People make shorter trips when gas prices are high. Instead of Block Island, they’ll go to  Shelter Island,” he said.

Though he hasn’t yet seen many people trade in bigger boats for smaller boats or switch to sail power, he said, “We’ll see how long these gas prices last. That’s what happened in the late 1970s, with the oil embargo.”

Outside at the fuel dock, Joe Pernal of PJP Petroleum was filling the storage tanks. He said people were giving him a hard time about high prices everywhere he went.

“Everybody calls it liquid gold, but it doesn’t affect me,” he said. “My salary stays the same.”

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39 Comment

  • THIS IS DESTROYING THE MIDDLE CLASS. “SHARE THE WEALTH” WITH WALL STREET AND SPECULATORS. If Bush was still in you could blame him an Big OIL. Nowadays its GE and the GREEN MOVEMENT. Are you better off today then only two years ago?