what is behind the threats of closing low cost gas stations

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Low cost service stations threaten to close. They do so after learning about the measures that the Government announced to discount part of the price of fuel. But also in full expansion in our country. What is happening?

April 1st. The date from which service stations have to apply the reduction of 20 cents/liter announced by the Government within its shock package against the economic consequences caused by the War in Ukraine. From this day until next June 30 (at least), fuel will be 20 cents/liter cheaper than its final price.

For this, the Government will assume a reduction of 15 cents/liter, while the service stations will have to put a discount of five cents/liter out of their pocket. A decision that also has its peculiarities, as we are going to see.

Are you yes, are you not. Although the final consumer will always receive a minimum discount of 20 cents/litre, not all service stations will manage the same. The major oil companies, defined in the Royal Decree as “wholesale operators of petroleum products with refining capacity in Spain and with an annual turnover of more than 750 million euros” they do have the obligation to contribute, at least, five cents/liter out of their pocket to complement state aid .

However, in the case of service stations that do not meet this requirement, mostly managed by SMEs, they may request the repayment of bonuses during the first 15 days of the following month, specifying in the Electronic Office of the State Tax Administration Agency (AEAT) “the amount that results from applying the discount to the volume of liters or kilograms that has been supplied to final consumers in the period reference”.

closure threats. The mechanism devised by the Government has not convinced the small service stations nor, either, the low cost ones. In both they threaten closures due to lack of liquidity. The measure “will force us to request credits, becoming financers of the Treasury,” said José Miguel Varela, vice president of the Seville Provincial Association of Service Station Employers (APES), in statements to ABC.

A statement along the same lines has been published by the National Association of Automatic Service Stations, which includes the large low-cost gas stations, such as Ballenoil, Petroprix or Gasexpress. In it they point out that “the deadlines given by the Government are not real, and thus many service stations will have to close before recovering the funds.” In addition, they point to a tax cut as the most appropriate measure.

Advancement. To mitigate the impact on gas stations, the Government opened the possibility for service stations to request a bonus advance to apply during the next month. Specifically “the maximum amount of the bonus that would correspond to 90% of the average monthly volume of the products sold by that collaborator in the year 2021”.

In other words, service stations can request an advance from the Government of the bonus corresponding to 90% of the monthly volume they had in the same period of 2021. This aid cannot be more than two million euros nor less than 1,000 euros and neither information is given on how much time the State has to deposit said amount.

no liquidity. Whether or not the advance has been requested, the low cost gas stations allege that they will not be able to guarantee having liquidity in their accounts in order to apply the bonus. Being legally obliged to deduct it from the final invoice, this would cause the closure of the businesses.

The main reason is the small profit margin with which these companies work. Low cost gas stations are competitive because they have the minimum number of employees at their stations, they do not incur expenses in stores or promotional campaigns and they trust their success to a good situation and word of mouth that spreads the word about where they are and what are their prices.

Even if you don't see it, it's here: how the 20 cents/liter aid is actually applied to your deposit

legal minimums. Low cost gas stations are more successful the higher the price of fuel. Keep in mind that the fuel is the same, since all fuels are supplied in Spain by the Hydrocarbon Logistics Company (CLH) that guarantees the minimum quality standards. Then it is each company that includes its own additives. Low cost companies choose to skip this last step, which is completely legal.

in full expansion. Little by little, the low cost service stations are gaining ground In our country. Ballenoil, the market leader, has announced an investment of 40 million euros for the coming years and expects to open 90 new stations to have 250 available by 2025. Petroprix has 135 stations and has opened 30 so far this year. Since last November, Plenoil has also opened 15 new gas stations.

Low cost service stations threaten to close. They do so after learning about the measures that the Government announced to…

Low cost service stations threaten to close. They do so after learning about the measures that the Government announced to…

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