GAS AND GO BROKE

After more than 20 years in the service station business, Raman Sethi thought he had seen it all.

He didn’t see this coming.

Earlier this year, Mr. Sethi, 53, began withdrawing money from his son’s $150,000 college fund to keep his five Northern Virginia gasoline stations from going belly-up.

“I haven’t seen anything like what’s going on now,” he said. “I’m hoping I can sell one of my stations to pay the bills. But times are so tough, I can’t sell. So what else can I do?”

Looking at gas prices these days, consumers might think that service stations are striking it rich. However, gas station owners are dealing with escalating costs that are digging into profit margins, making it hard for them to continue.

Business has been so bad for Mr. Sethi that he was having panic attacks. He now needs medication to deal with the stress.

At his Pure gas station in Arlington, it costs about $120,000 to fill up his 30,000-gallon tanks. Five years ago, he had three days to pay the distributor. He now has one.

It used to be easier, he says. He’d buy gas for $1.85 and sell it for $2 and pocket the 15 cents profit. But now, with gas prices soaring, he doesn’t want to price himself out of range of customers already burdened with high prices. So he buys at $3.96 and sells it for $4.07.

Competition also plays an integral part. If Mr. Sethi sells his gas at a penny or two more than one of his competitors, he could lose much-needed business.

“It can be hard,” he said. “You want people to keep coming back, keep them happy.”

To make matters worse, his profit is no longer guaranteed. If a customer uses a credit card, Mr. Sethi has to pay an interchange fee to the patron’s credit card company.

Interchange fees are transactional costs that credit card companies charge gasoline retailers. If a customer swipes a card at one of Mr. Sethi’s stations, the company takes just under 2 percent of the total.

The percentage is fixed to the dollar. So when gasoline prices spike, so do the charges, causing Mr. Sethi’s profit margins to shrink.

Gas prices are hovering around $4 a gallon, meaning the fees are about 10 cents a gallon. The mounting costs are putting station owners like Mr. Sethi out of business, says Paul Fiore, director of government affairs for the Washington, Maryland, Delaware Service Station & Automobile Repair Association.

In light of these concerns, Visa lowered its interchange fees 17 percent last week. Starting in October, if a motorist uses a Visa card to fill up a 15-gallon tank at $4 a gallon - or $60 total - the station would pay about 95 cents total instead of 2 cents on every dollar, or $1.20. In April 2007, MasterCard decided to cap interchange fees at $50.

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