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Spiraling gas prices drive stations out of business

Date Posted: 2008-07-04

The price of a liter of gasoline is going up Y8-10 this month as crude oil prices continue to soar, but the economic impact is hitting more than consumers at the pump.

Seven gasoline stations were forced out of business in June here in Okinawa. “The wholesale price went up just like a body blow, affecting everybody’s life,” says the vice president of the Prefecture Oil Commercial Union. Seishin Maehara says ”every gas station has a hard business, and the wholesale cost of gas looks like it will never stop going up.”

He predicts more gas stations will fall victim to the price hikes, which are squeezing stations trying to make even a slight profit. Maehara says there were 466 gas stations in Okinawa in 1998, but only 384 in business now. With little, if any profit coming their way as the prices spiral, Maehara says his Prefecture Oil Commercial Union expects another 50 stations to close before year’s end.

With competition high, many stations are trying to keep pace by matching prices, even though it means only ¥1 profit per liter based on the most recent ¥162-163 price. With the latest increase, a liter of gasoline is expected to top ¥175, compounding station owners’ problems. The Union says consumer reaction to the higher prices is to drive less, and to try bicycles or other methods of transportation.

The prices for car parts, tires, oils and engine oils are increasing, too. The pinch on drivers is causing many to skip out of town and leisure driving, reducing demand and lowering even the minor profits by stations.

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