‘You Must Be Killing It’ – What People Get Wrong About High Gas Prices

You've probably thought it at least once. Gas prices shoot up and you pull into your local station and think, "They must be making a killing right now."

Turns out, that's one of the biggest myths in the business.

We sat down with Mike Lipton, CEO of Lipton Energy and Lipton Car Wash right here in Pittsfield, and he set the record straight on what really happens to a gas station's bottom line when prices spike.

"The biggest misconception is when prices are this high, people come up to me and say YOU MUST BE KILLING IT," Lipton told us. "In fact we are absolutely not."

So why not? It comes down to how gas stations actually make money. They operate on what's called a floating margin, meaning the profit built into each gallon is relatively small and doesn't automatically grow just because the price at the pump goes up.

We're talking a few cents per gallon. Sometimes less.

And when prices climb, customer behavior changes fast. People drive less. They shop around more aggressively for the cheapest gallon they can find. That means less volume coming through the pumps, which directly hurts the station's bottom line.

Then there's the credit card fee issue, which most people never think about. Those fees are calculated as a percentage of the total sale. So when a fill-up costs $80 instead of $50, the station is paying a bigger fee to the credit card company on every single transaction. The higher the price, the higher the cut that goes to the bank, not the station owner.

With tensions in the Middle East continuing to push oil prices around, local business owners like Mike Lipton are feeling the squeeze right along with the rest of us.