Price-sensitive motorists have long viewed independent service stations as relative havens in times when fuel costs are soaring.

Lower gasoline prices are the key advantage that independents have in competing against stations affiliated with major oil companies like Chevron, Shell and ExxonMobil. But during the great price spike of 2008, pump prices have often been lower at branded dealers than at independent stations – sometimes by 25 cents a gallon or more.

“From the beginning of this year, we cannot compete,” said Jamal Jonna, co-owner of the Ultra Gas and Mini-Mart on San Diego's El Cajon Boulevard. “There is no independent guy that can match or beat the brand name.”

The reason is that independent station owners have been paying higher wholesale prices for gasoline than branded dealers – a situation known in industry parlance as a “rack inversion.”

Independent dealers who count their profits at 10 or 11 cents per gallon say in recent weeks they confronted wholesale price increases of 15 or 20 cents per day – and there's nothing they can do about it.

At Pearson Fuels, an independent station on El Cajon Boulevard, co-owner Mike Lewis said he was selling each gallon of unleaded gasoline at 2½ cents below cost during the first week of June – and his price was still 25 cents a gallon higher than nearby branded stations.

“I've never seen it this bad,” said David Hallack, who owns Emerald Oil of La Mesa. “I thought (Hurricane) Katrina was bad. But this is a lot worse. For the past six months, we've been getting slaughtered, just killed.”

With gasoline prices at record highs, many consumers assume that even independent gas stations are sharing in Big Oil's windfall profits.

Behind record fuel prices at the pump, however, dealers are seeing unprecedented spikes in wholesale fuel prices, sharply higher credit card fees, increased operating costs and reduced customer demand.

Such factors help explain why ExxonMobil recently announced plans to sell its company-owned service stations, joining an industry trend by getting out of the retail fuel business.

Industry officials estimate that major oil companies now own fewer than 2 percent of California's gas stations – and less than 5 percent of stations nationwide.

That means branded station owners are responsible for maintaining the property – including environmental concerns – and buy their fuel under long-term contracts directly from their affiliated supplier.

Independents typically buy gasoline from refinery terminals, which set wholesale prices based on the spot market for crude oil. The independents can set their retail prices below branded rivals when wholesale fuel prices “at the rack” are below the so-called “tank wagon price” paid by branded dealers.

But with U.S. crude oil prices doubling over the past 12 months, wholesale prices at the rack have often been sharply higher than what branded dealers pay. While such price inversions occur from time to time, wholesale prices paid by independents in San Diego stayed upside-down from mid-March to June.

If such inversions continue indefinitely, “The end result is that every independent would try to become a branded station – or they would go out of business,” said Lewis of Pearson Fuels.

“I'm sure every independent is feeling it,” said Dave Whitlow, who owns Spirit Gas in Lakeside. “We're all pumping 50 percent less than we were a year ago.”

Whitlow said wholesale fuel dealers now react within hours to spikes in crude oil futures trading on the commodities exchanges.

“The rack price, the wholesale price, is changing daily and sometimes even two or three times a day,” Whitlow said. “If you own a branded station with a fuel-supply contract, the prices also change, but just not as much.”

Such volatility means every 8,800-gallon tanker truck of gasoline becomes a $35,000 gamble for independent station owners.

“When prices get this high, it gets much more difficult for people to pay our bills,” said Matt Davis, purchasing and supply coordinator for the Soco Group, a fuel wholesaler in Carlsbad. “With higher prices, we have to extend a lot more credit.”

The implications are obvious, especially to those who view independent service stations as a competitive antidote to the seemingly lock-step pricing among branded gas stations.

About 20 independent stations have closed in San Diego County over the past six months, according to Charles Langley, fuel price specialist at UCAN, the Utility Consumers' Action Network.

Langley estimates that over the past 10 years, 240 gas stations of all types have stopped selling gas in San Diego – roughly 30 percent of the county's total. Of those, 80 were independents, Langley estimates.

Among the latest casualties is Hallack's Emerald Oil in La Mesa. He said he recently signed a letter of intent to affiliate his station with Valero Energy Corp., which operates hundreds of service stations in California.

“If it were not for our alternative fuels and the alternative fuels that I sell to others, we would have had to shut down two years ago,” said Lewis of Pearson Fuels. His station sells and supplies ethanol, which consists of 85 percent ethanol and 15 percent gasoline and is suitable only for flexible fuel vehicles. It has been priced nearly a dollar below the station's price for unleaded gas.

Mini-mart sales are also a key to survival, Lewis said. He noted the $1.20 profit he makes from a $1.59 slush drink is about the same as the $1.21 profit he gets from selling 11 gallons of gas at $4.54 a gallon.

Another problem facing branded and unbranded stations is the percentage of the sales price that credit card companies charge on every consumer transaction. The percentage is fixed, usually at just under 2 percent, but with gas prices topping $4 per gallon, credit card companies are taking a bigger piece of each fill-up.

Gas stations, which typically mark up retail gasoline by 11 to 12 cents a gallon, are seeing credit card fees take most or all of their profits.

UCAN's Langley said another ominous development for consumers is the recent announcement that Sacramento-based New West Petroleum plans to sell 29 service stations in San Diego.

New West acquired the Exxon-branded stations as part of an antitrust deal that enabled the 1999 merger of Exxon and Mobil to move forward. Valero also supplied fuel to New West's stations, which Langley said has helped to keep gasoline prices more competitive in the San Diego market.

Gil Moore, New West's founder and owner, said he doubts that the sale will have any effect on gas prices in San Diego, which he contends have become much more competitive over the past decade.

On Friday, the average price for unleaded gasoline in San Diego County was $4.61 a gallon, according to UCAN. In San Francisco, the average price for unleaded was $4.62, according to the American Automobile Association's Daily Fuel Gauge Report. It was $4.63 a gallon in Los Angeles and $4.57 in Sacramento.

Moore said he decided to sell the stations because “we've been running these stores for 10 years and it's getting old. It has nothing to do with San Diego, but we live in Sacramento and we're just tired of coming down to San Diego to do business. We just decided we're going to concentrate in Northern California.”

That may be true, but Lewis of Pearson Fuels also sees the deal as another sign of the times.

The fact is that “if your business is a cash cow, you keep it – or you figure out a way to keep it,” Lewis said. “I can tell you, we haven't made money in a long time.”

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 Bruce Bigelow: (619) 293-1314; bruce.bigelow [at] uniontrib [dot] com