When gas prices increase, many gasoline retailers report an increase in gasoline theft, or "drive-offs."
The Million Dollar Problem
Gasoline price volatility traditionally leads to a significant increase in gasoline theft, brought on by misdirected consumer anger at higher prices. However, more retailers now require prepay to stop the problem that had gotten out of control.
Gasoline theft, also called drive-offs? is a problem at stores that don't require prepay. The average loss per store in 2010 was $1,440, considerably more than in 2009, when the figure was $761. However, it is difficult to calculate an industry-wide number, since prepay is the norm at the vast majority of stores. Gasoline theft peaked in 2005 when it cost the industry an estimated $300 million. It has declined considerably since September 2005 (post-Hurricane Katrina when gasoline rapidly increased and topped $3 per gallon) as more stations began mandating prepay to stop theft.
Gasoline theft tends to be a problem in densely populated metropolitan areas and near interstates where there's a greater anonymity; in these areas, retailers have reported losses as much as $1,500 per store per month. At stores in communities, where everyone tends to know each other, the problem generally is not as significant.
Gasoline theft is not a "Robin Hood" crime of robbing the rich -- retailers typically make pennies a gallon on the sale of gasoline. In fact, they can often make as much, or more, from the sale of a 12 oz. cup of coffee than a 12 gallon fill-up.
The increase in gasoline theft is directly related to price increases, as opposed to high prices. Theft generally increases every time prices increase.
Gasoline Thief Profile Evolution
Typically, convenience stores can experience a few gasoline thefts a week; however, when prices increase, some stores see several gas thefts a day. With retailers making a few cents profit on the sale of gasoline, a retailer needs to sell thousands of additional gallons of gasoline just to make up for the loss. Oftentimes, it only takes one $50 theft a day to significantly erode -- or wipe out -- a retailer's daily gasoline profits.
Gasoline theft has always been an issue for the industry, and was often teenagers taking a few dollars of gasoline for a thrill. Today, the problem of theft is across all demographics, and the cars involved with the crime are everything from "junkers" to late-model SUVs.
Just as the frequency of gasoline theft increases, so does the size of the fill-up stolen. And with higher prices, the amount lost from just one gasoline theft can easily top $100 when an SUV in involved.
A disturbing trend over the past few years is the emergence of gasoline theft rings, in which specially designed trucks are used to siphon fuel from stations' underground storage tanks. Members of a theft ring operating in Florida were arrested in June 2005 for using trucks that could siphon upwards of 1,000 gallons of fuel undetected. Also in June 2005, a man in Cottondale, AL, was severely burned in an explosion while allegedly trying to siphon hundreds of gallons of fuel from a station.
Mitigating Theft Comes at a Cost
Requiring customers to prepay for their fuel would virtually eliminate the problem of gasoline theft. However, consumers, wanting convenience, will usually choose to go to another retailer that does not require prepay if one is close. Even so, the problem of gasoline theft in 2006 led to a record number of retailers mandating that customers prepay for their fuel.
The town of Mt. Pleasant, SC (a suburb of Charleston), enacted an ordinance in early 2004 that mandates that all retailers require prepay. Similar laws have since been enacted in Twin Falls, ID (late 2004), Myrtle Beach, SC (July 2005), Bowling Green, KY (January 2006), Kansas City, MO (July 2006) and Flower Mound, TX (Oct. 2006). These are believed to be the only laws of their kind in the United States, although in some areas of the country prepay is the norm, especially California. Other areas of the country have looked at mandating prepay, including Conway, AR; Fayetteville, NC; Topeka, KS and Milwaukee. In February 2008, British Columbia became the first and only Canadian province to enact such restrictions.
Besides the risk of losing customers, retailers usually elect to require prepay as a last resort, since generally customers will underestimate their gasoline purchases because they don't want to have to go back in the store for change. Also, they tend to shop less inside the store, where margins are healthier, because they have already been inside the store once to prepay and find going back inside to be inconvenient. There also are concerns that mandating prepay could lead to cash customers instead paying by credit card at the pump to avoid the inconvenience of prepay. Since credit card fees are 2.5 to 3 percent, that means that retailers could incur an additional 7 to 9 cents per gallon in fees when gasoline is $3.00 per gallon.
Usually, retailers will look at requiring prepay for certain pumps or certain hours before requiring it all the time at a store.
Gasoline Theft Hurts Retailers
Retailers are being hit hard by the higher gasoline prices. During periods of price increases, retailers' wholesale costs rise faster than they can recover them at the pump so profit margins are down significantly. NACS reports that gasoline margins in 2011 were 5.3 percent and much of the reason for declining fuel margins is price volatility for gasoline.
Because theft is typically linked to elevated prices, gasoline theft usually hits retailers when the value of that stolen property is at an all-time high.
In addition to reduced profit margins on gasoline, more customers pay for their gasoline by credit card (approximately 60 to 70 percent of gasoline customers). The processing fees for credit cards (as much as 3 percent) further shrink already reduced margins to the point where retailers often make less per gallon than the credit card company.
Gasoline Theft Negatively Impacts Consumers
- Law-abiding customers must pay the cost of the theft in higher prices.
- Some drive-offs leave the gas island at unsafe speeds to avoid being caught, creating a more dangerous environment.
- An increase in the incidence of gasoline theft makes more retailers consider mandating prepay, which consumers do not prefer to have as their only option. If more areas mandate prepay, it will be one less product available to consumers on the "honor system" where they can obtain a product before they pay for it.
Technology Helps Prevent Theft
Low-tech solutions can be effective. Simply greeting all customers -- whether by intercom or in person -- can be effective. This takes away the feeling of anonymity.
Technologies like the patented program developed by Pump-on LLC largely protect the customer's convenience and still ensures that theft is eliminated. With this program, cash customers use their driver's licenses (where basic identification information is read) at the pump to authorize dispensing. As of January 2007, a number of retailers have committed to work to further develop this program, including Sheetz, Wawa, RaceTrac and QuikTrip. In fact, QuikTrip has been using this type of program to great success in a number of cities. If customers fill up and fail to pay, their names are turned over to police. In Tulsa and Kansas City, gasoline theft was "reduced to a trickle," QuikTrip reports.
Some Success Gaining Legislation Passage
Between 1998 and 2005, 27 states passed laws in which a judge has the discretion to suspend the driver's license of someone convicted of gas theft.
In 2005, Oklahoma and Virginia increased the fine for those convicted of gasoline theft. Also in 2005, South Dakota passed a law (which took effect July 1) that makes the owner of the vehicle used by someone who drives off without paying for gas liable for the cost of the gasoline plus a service charge. If the fee isn't paid, a civil fine is assessed.
Gas thieves are getting their driver's licenses suspended. According to the Indiana Bureau of Motor Vehicles, the state recorded 171 license suspensions for gasoline theft in 2002, 366 suspensions in 2003 and 246 suspensions in the first half of 2004.
An important part of Georgia's campaign, developed by the Georgia Association of Convenience Stores and Georgia Oilmen's Association, and many of the other states, included stickers on the gas dispensers that warned customers of the impact of gas theft. A typical message showed a state trooper holding someone's driver's license, accompanied by the message: "Pay for your gas or lose it!"
A provision of the South Dakota gasoline theft law states that if an operator can get a license plate number and description of the vehicle, they can request information in writing to law enforcement, obtain the drivers information and send them a bill in the mail.