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Minnesota gas stations 'hate their gas prices, too,' but deep discounts are limited by law

A big gas station chain outside Minnesota is promoting a 4th of July cap of $3.99/gallon. Could it happen here? That depends.

ST ANTHONY, Minn. — Just below the gas prices that are posted outside Murphy's Service Center in St. Anthony, a simple message has been catching the eyes of drivers in recent weeks.

"We hate our gas prices, too," the sign reads.

"I put it up because I'd like my customers to know that we're frustrated with this, too, and we don't like putting those high numbers up and we have empathy for them," said Chuck Graff, whose family has operated the station for more than 60 years. "I thought the message hit home a little more in these times than 'two Snickers bars for $2' or something like that."

Not only was Graff right, but the message didn't just hit home here at home. 

"It kind of went a little viral," he said. "Everything from local, regional, national, even the Daily Mail in the UK had an article about it." 

According to a new Gallup poll, 67% of Americans, up from 52%, now say gas prices are causing financial hardship, but Graff says most customers have been understanding of the limitations and built-in costs that stations like his face in keeping prices down.

Through the years and lots of price swings, he says margins don't really change much.

"Usually, we'll make anywhere from 8 to 18 cents — that's what you try to make — on a gallon of fuel in order to stay profitable," he said. "You need to pay for your upkeep on your pumps, to pay for all your licenses and everything. There's a lot of expenses that go into running gas stations."

So where does all the rest of our money go when we fill up? According to the U.S. Energy Information Administration, in May, 59% of the price per gallon was linked to the cost of crude oil; 26% was related to refining; 5% went toward distribution and marketing; and taxes accounted for 11%.

On top of that, as prices rise, Graff says credit card fees do, too.

"You're paying 2 to 3 cents per dollar, and if you figure almost $5 for a gallon of gas right now, it makes for some significant credit card fees that we have to pass on in order to still make a little profit for ourselves," he said.

Despite so many cost considerations just to break even, Sheetz, which operates more than 500 gas and convenience stores from Pennsylvania to North Carolina, has just capped its price of 88 octane at $3.99 a gallon. The company says it will continue the promotion through the busy July 4th weekend. 

If a similar promotion were to be tried in Minnesota, it would receive state scrutiny and would likely be more limited. According to state law it's generally illegal to sell gas below the wholesale cost, but the law does have an exception for below-cost promotions if they are limited to no more than three days every three months. The Minnesota Department of Commerce is tasked with policing 'Below Cost Gas Pricing' and investigates based on complaints (often filed by competitors).

If a Minnesota chain were to try it as a way to spur sales of food and other items, Graff says it would be hard to compete.

"They obviously have a lot more ability to absorb that kind of hit than us small businesses can," he said. "I'd literally be giving away thousands of dollars if I did that and I can't afford to do that."

For now, neither he, nor the other owners need to worry. Despite more Americans claiming high prices are taking a toll, AAA is still predicting record travel on the road this holiday weekend.

"I'm kind of surprised that it has been this vigorous with how high gas prices have gotten," Graff said. "My volume, so far, has not taken any significant drop at all. I know there is going to be a breaking point that I think we're approaching, that people are going to start parking their cars, and they're going to go 50 miles up north instead of 200 miles up north."

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