Consumers wonder how high gas prices will go
Podcast Episode
Kyle Geissler talks with Janesville Gazette reporter Cathy Idzerda about the difficult task of predicting gas prices.
It’s like the word problem from hell.
Take the cost of a barrel of oil. Add the cost of refining, transportation, taxes and retail markup, factor in demand, and you’ll get the price of a gallon of gas.
Right?
Well, that formula might work.
Or it might not.
It gets worse: A gallon of unleaded is now $3.26, and even the top gas prognostications aren’t sure how bad it will get.
“That’s what everybody wants to know—how high will it go,” said Pam Moen, public affairs director for AAA Wisconsin. “Nobody knows.”
Up until a couple of weeks ago, AAA was projecting a decline in gas prices based on supply and demand.
“It’s known that consumer demand is dropping; it’s known that supplies of gas are rising,” Moen said. “Based on those two things we felt certain we’d see prices dropping. But no sooner than we said that, crude oil took off to these record high prices.”
Now, refineries are paying a record amount for oil.
What happened?
Crude oil is a commodity that’s traded, Moen said. Some market analysts speculate a weak dollar is pushing investors toward crude oil.
The summer travel season is coming up, too.
“Historically there’s been an increase in the demand for gas in the spring,” said Jim Johnson, owner of Lions Quick Marts in Janesville.
Prices also go up in spring because refineries take time to do seasonal maintenance and change over from making winter to summer blends, and that can decrease supply as well.
But in this market, all bets are off.
“The market is certainly fragile,” Johnson said.
Moen and her colleagues at AAA Wisconsin study a variety of scenarios before making predictions about the price of gas.
Is there even a remote possibility the price could go down?
“There’s no guarantee that we’ll have high demand this summer. With the state of our economy, people are looking for ways to cut back and save money,” Moen said. “If we get through the refining maintenance periods smoothly and the demand is not as high, prices could go down.”
How about the nightmare scenario of $4 a gallon gas? It’s already happening in some parts of the country.
“AAA has not gone on record saying there will be $4-a-gallon gas,” Moen said. “We are not among those who are convinced it’s going to happen; it’s not a foregone conclusion.”
Moen paused, and then added, “Although it could, for all of the complicated reasons we just talked about.”
Johnson was less sanguine: “I would say that it’s certainly possible. We would much rather see gas prices lower.”
Where’s my money? Convenience stores feeling the pinch, too
Despite what consumers might think, convenience store owners aren’t the ones getting rich off higher gas prices.
“Costs are going up, and the margins get really squeezed,” said Jim Johnson, owner of Lions Quick Marts in Janesville.
More people are paying for gas with credit cards. The credit card company gets a percentage of each sale.
“Sometimes our whole margin on gas goes to the credit card company,” Johnson said.
As the price of gas increases, so do drive-offs—consumers who fill up and leave without paying.
Station owners now routinely invest in expensive security systems to reduce their losses from drive-offs.
Many gas stations in major metropolitan areas are going to the prepay system.
Gas saving ideas
It’s a piece of advice that’s so obvious, it’s often ignored: If you want to save money on gas, drive less.
Duh.
Everybody knows it, but not very many people take it seriously. Sure, they might skip a long drive to a vacation spot, but they don’t consider the amount they can save by reducing short trips around town.
To save a gallon of gas, you probably need to cut about 22 miles of driving from your week, according to AAA Wisconsin.
Here are AAA Wisconsin’s top ten ideas for saving gas. Remember, every mile counts:
1. Use mass transit or carpool. Even if you only ride the bus or carpool once or twice a week, you’re already well on to your way to saving money.
2. Slow down. Research shows that speeding uses more gas.
3. Combine errands. Instead of spreading out runs to the bank, post office and grocery store over a couple of days, do them all at once. If you do them before or after work, you’ll save yourself a trip on the weekend. It just takes a little advance planning.
4. Remember the Internet. You can bank, buy stamps, pay bills, renew library books and shop online.
5. If your family has two cars, drive the more fuel-efficient car whenever possible.
6. Take a hike (or ride a bike).
7. Work from home. Even if it’s just one day a week, it can make a difference.
8. Have a dinner party. Invite neighbors over instead of having everyone go out to eat.
9. Share school rides.
10. Keep the trunk light. The heavier the load your car has to carry, the more gas it guzzles. Remember: Your trunk is not a storage locker.

Mar 22, 2008 at 10:18 a.m.
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Paying by credit card is not the problem. Our dependency on oil is. Just like our dependency on alcohol. Denial keeps the problem in tact.
Mar 22, 2008 at 9:08 a.m.
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What's the unemployment rate in Canada? In a socialized enviroment there is no incentive to work hard and better yourself because everything is given to you. You become dependant on the government to support you. I for one have no confidence in the government being able to take care of me better than I can take care of myself. I like to think that I can make health care decisions for myself and having the flexibility to go to any doctor that I choose and being able to get second opinions if I need one. The free market works well and provides much better care than a government based program. The health care system in the United States needs to go back to that as well. Look at the services that aren't covered by health insurance that you have to pay for out of pocket (Lasik eye surgery for one)the cost of Lasik when it first came out was thousands of dollars and then there were more doctors doing it and competition came into play and the price comes down. I think it's a few hundred dollars now. The same with those heart scans that are advertised. If people had to actually buy health care the price would go down. Sorry for getting of of the subject of gasoline prices.
Mar 20, 2008 at 6:38 p.m.
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from husbandofmath "Almost all of your largest economies are socialist in nature so I guess it does work"
That in no way shows that it works...if true, it just shows that they are socialist in nature.
In general those that like capitalism have more, or have the tools and abilities to have more. Those that like socialism, again in general, have less and do not have the tools and abilities to have more.
Mar 20, 2008 at 2:11 p.m.
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husbandofmath,
The oceans are not getting warmer; they are getting cooler. Stop perpetuating the global warming myth.
http://www.abc.net.au/science/news/stori...
http://www.scienceblog.com/cms/ocean-coo...
--
Oil can be made from anything that grows.
http://www.worldnetdaily.com/index.php?f...
So does everything that can grow cause global warming, husbandofmath?
Mar 20, 2008 at 11:58 a.m.
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Thanks TCB! I didn't want to go down the road again about the health care here. Just suffice to say I can see my personal doctor here faster and for longer than 10 minutes. I've had a few dealings with emergency care with family members here and was comparable to what I saw in the US.
garyprimer: It may be true that there are a few Canadians that are not overly fond of Americans, but the main thing I see here is Canadians do not like the US government's way of dealing with the rest of the world (and at present, Canada has a Conservative heading the government). And Canada is getting dragged down by the USA's recession, which doesn't help. The gas prices have gone up here as well, from about 83 cents/litre about 18 months ago, to about $1.05/litre (that is approximately $4.60/gal). At least our money is trading at par ;-)
Mar 20, 2008 at 10:35 a.m.
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It doesn't make any sense to me to use our food supply for our fuel supply. I would rather just have one commodity hit with exorbitant pricing than everything that we consume get hit. All of our food is corn based, one way or another. Get rid of ethanol, so our food prices come back to where they should be. (Is there any truth to what I heard about ethanol taking one gallon of gas to produce?) To me ethanol is a catch22 that will make us all go broke...
Mar 20, 2008 at 9:56 a.m.
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Octonal is better than ethanol because it packs more energy into the same space and doesn't attract water so much. Oil is bad because it causes GLOBAL WARMING!!! When the oceans become warm enough they become acidic and much of life in it DIES!!! See Permian extinction. There was a Science Friday on ethanol last year. Just Google "Science Friday ethanol".
Northman, anecdotal evidence is the exact opposite of broadbased. A survey would be broadbased. We have waiting here as well if you can even find a competent doctor who is taking new patients. It can take up to two months just to see a doctor.
Almost all of your largest economies are socialist in nature so I guess it does work.
Mar 20, 2008 at 9:38 a.m.
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And I prefer ordinary ignorance, thank you very much.
Mar 20, 2008 at 9:12 a.m.
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I have to agree with whybesad. Ethanol is not the way to go. A well respected economist has exposed the ethanol hoax:
http://www.worldnetdaily.com/index.php?p...
__
I would support drilling in ANWAR. To put things in perspecetive, let's say ANWAR is the size a football field. That would make the size of the drilling area the size of a postage stamp. ANWAR is huge and the drilling area would not inconvenience a few caribou.
Mar 20, 2008 at 9:09 a.m.
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Thank you for enlightening me.
Mar 20, 2008 at 8:51 a.m.
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garyprimer:
Please speak from a position of knowledge rather than abject ignorance. Health care in Canada is alloted by queuing up and waiting your turn. The severity of your problem may bump you up in the line, but then again, maybe not. Your turn for a simple x-ray may be weeks, for an MRI sometimes months. I remember reading an article that showed pets get MRIs faster than humans in some provinces. Care is rationed because costs are tightly controlled, which influences wages, which reduces the incentive to practice medicine there. Personality is not a factor.
Mar 20, 2008 at 8:45 a.m.
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What does this have to do with the price of gas?
Mar 20, 2008 at 8:39 a.m.
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Maybe your personality had something to do with your problems finding health care in Canada. Some Canadians are not overly fond of the United States to begin with.
Mar 20, 2008 at 7:12 a.m.
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ANWAR anybody? We have oil supplies but, the tree huggers just won't let us drill for it. Instead they want to make fuel out of corn. Which is driving up the costs of everything that contains corn or relies on corn for feed. You gotta love the government we are getting it from all angles. It costs more to drive the car to the grocery store where the price of everything has gone up. It costs more to register the car. But, they get their money and they still can't figure out how to budget it. But, we as taxpayers have to budget our money in order to survive. When the government runs short they just raise our taxes. Does anybody think that the $1.00 tax they put on cigarettes is really going to go towards smoking prevention?
Mar 20, 2008 at 7:05 a.m.
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TCB: I did indeed mean to add "months", natch. Good catch, thanks!
husbandofmatch: Anecdotal evidence perhaps, but broadly based and first-hand. Which is more than the folks who insist in giving the US a "health system just like Canada" ever provide. My point is that when people insist the grass is greener on the other side of the fence, they should go live there for a while and see for themselves, rather than insist on legislation that forces everyone to live there. Metaphorically, that is.
Mar 20, 2008 at 12:01 a.m.
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the high price of gas is certainly obama's fault.
Mar 19, 2008 at 9:57 p.m.
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...From Wikepedia "Socialism refers to a broad array of ideologies and political movements with the goal of a socio-economic system in which property and the distribution of wealth are subject to control by the community."
Based on this definition, we already have socialism in this country through taxation and govt. programs.
Mar 19, 2008 at 9:13 p.m.
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You should have to pay our prices in Australia. It is currently for unleaded $1.45/litre at the bowser. That is 1/4th what you pay per US gallon. Next time you fill-up at the bowser remember that we are paying $5.80 in Australian dollars for that same gallon about which you complain at the price.
Mar 19, 2008 at 8:52 p.m.
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Northman your using anecdotal evidence. Everyone has a horror story about the system. Here you get Nationalized health care if you are about to die. I don't know how that is better. We can't make a better system if we don't try to make a better system. Centralized planning which doesn't work is much different than socialism. Socialism as practiced in many of the Scandinavian countries helps because it reduces the risks of life and allows people to take more risks. Risk is good.
Mar 19, 2008 at 8:52 p.m.
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Northman:
I think you meant to add "months" for the pregant/prenatal check ups-that women were placed on 10+month waitlists for prenatal care....correct.
Remind me again, how long is the human gestation period? (just kidding-parkergrad and I debated this issue in the past-he is a worthy advosary)
TCB
Mar 19, 2008 at 6:37 p.m.
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jsvlparkergrad:
I recently returned from 4 years in Ottawa. I had Americans (who were entitled to full health benefits) working for me who were not able to get standard health care in a timely manner -- this was the norm, not the exception. I had pregnant wives who were put on 10+ waiting lists to get pre-natal checkups. Sound good to you? I knew any number of Canadians who didn't want to wait, or couldn't wait for care, and went across the border to pay out of pocket. How many folks go north to pay for health care because they can't get it here? Granted it's not all bad, some parts of the system work well, but it's not a level of care I'd want to settle for. In short, the Canadians have a great health care system, as long as you don't have to use it. I've been there, I speak from first-hand recent experience.
Mar 19, 2008 at 5 p.m.
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If all of the oil industry profits were taxed away, a $3.00 gallon of gasoline would only drop to $2.90. Relief is only going to come by increasing domestic supply, but Congress continues to reject any attempts to allow oil drilling in the country’s coastal waters, on federal land in western states, or in Alaska, where tens of billions of barrels lie waiting to be put to productive use.
Instead, Congress prefers to pursue an energy policy that transfers America’s wealth to countries such as Iran, Saudi Arabia, and Venezuela. It’s not Big Oil that’s driving up the cost of crude oil and gasoline, it’s Big Government.
Mar 19, 2008 at 4:05 p.m.
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Socialism isn't the answer.
Mar 19, 2008 at 3:27 p.m.
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Northman:
I have lived in Canada for 2 years now. My universal health care here is just fine, thanks. It has served me well and also members of my family here. I was a part of the American health system for over 25 years, and I get better health care coverage than I did with my American health insurance plan. And husbandofmath, you nailed it on the head about the ER's serving as "health care" in the US.
As for gas, it is more expensive here, about $1.03 per litre (a litre is just less than a quart). So it equates to paying over $4 a gallon. I live in a large city, so it is more convenient to walk a few blocks, ride a bike and take a bus, subway or street car (which is usually faster and more healthy than driving a car everywhere). I have lived without a car for over a year now, and it has been great not worrying about paying for gas, car payments, maintenance, insurance, etc. It has also been a lot less stressful as well.
But I remember growing up in the 60's in Janesville, and how big the car culture was (and still is), and even now, it is hard to get around Janesville without a car. I like cars, especially driving outside of the big city. I am hoping we can get the alternative-fuel vehicles up and running soon, so we don't have to depend on foreign oil much longer.
Mar 19, 2008 at 2:34 p.m.
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Don't forget about the value of the US dollar falling vs. foreign currency. That's also another reason the price of oil for America is going up. As the value of the dollar decreases, it takes more dollars to buy that barrel of oil, hence we pay more the oil used in our gasoline.
Mar 19, 2008 at 2:10 p.m.
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For the record, I was not suggesting that Venezuela is a good place to live because the gas is cheap. Another commenter was ridiculed for making the statement that gas could be bought for pennies a gallon in some countries. I was merely pointing out that the statement is true and backing it up with facts. I could also point out that gasoline is available in this country for pennies per gallon. Three hundred and twenty-five or more, but never the less, pennies per gallon.
Mar 19, 2008 at 1:57 p.m.
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Health Care and oil are as different as night and day. One is a commodity the other a service that involves risk. For example, where do you return your triple bypass if it goes bad. Also, we already have Nationalized Health Care, they are called Emergency Rooms. Ever been to one? This means that the government is already subsidizing health care for those without insurance.
Mar 19, 2008 at 12:49 p.m.
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DrTalk:
I should have been more clear in my comment about "pocket lining", I was aiming at skalb's post.
And I couldn't agree with you more, government subsidies in general are a bad idea, and should never be permanent. "Universal health care" is a horrible idea. If the people who advocated it would go live in Canada for a year, and try to get their health care needs met, they would realize that there's no free lunch in that areana.
Mar 19, 2008 at 11:42 a.m.
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Northman,
I didn't use government subsidies as an argument for low gas prices. My purpose for giving you a link to that article was because you wanted to know where the low gas prices were.
If you understand the term "government subsidy" then you'd also know where the money actually comes from - the people. Which is why no one in there right mind would want to move to Venezuela. It's also why government funded health care is a bad idea.
Mar 19, 2008 at 10:36 a.m.
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Gas is $.12/gal in Venezuela because it is subsidized. Using that as an argument to prove the US government is "lining their pockets" goes beyond absurd. Of course, if anyone would like to go live under the madman, err, make that Benevolent Socialist Dictator Chavez, I think we should subsidize their one-way plane ticket to that wonderful workers' paradise.
Mar 19, 2008 at 10:28 a.m.
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When gas stations raise prices because another station did it is called "unconscious parallelism". It is a form of price fixing and is illegal but difficult to prove. Gas is cheap in Venezuela and other OPEC countries because it is subsidized by the state. So, they are paying for it in other ways. Most likely by reduced revenues.
Blaming our energy companies is a bit ridiculous. Historically prices go up and down. Manipulated markets go up and up and up. Free world energy companies don't own but a few dwindling oil fields. They have to make unstable agreements with dictatorships who change their minds all the time.
OPEC is a price fixing cartel. They reduce production in order to raise prices. However, you could blame the idiot Republicants and President for deficit spending which causes the value of the dollar to decline. Oil is traded in dollars so OPEC countries lose money when the dollar slides which is why they cut production. Invading a country in the region doesn't help either.
The best thing to do would be to remove all income and others taxes and have a single tax on gas. So, if you walked or road your bike you wouldn't pay taxes at all and their wouldn't be need to repair and maintain roads. Two benefits in one.
Mar 19, 2008 at 10:14 a.m.
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Gary is correct. Although, Hugo Chavez knows next to nothing about economics gas is cheap as it it in Saudi Arabia. Gas is $8+ per gallon in the UK. Gas is also 7-8 per gallon in Norway and they are a net exporter! Not importer, like the US.
The US needs more capacity to refine. Gas taxes will go up and Wisconsin is in the top 10 nationally for the highest gasoline taxes. Who does this hurt? The poor. Those driving greater distances, trucking companies, farmers, those living from paycheck to paycheck. The global economy runs on oil. This is a fact. There is a lot of oil in ANWAR, ask Russ Feingold why he is against increasing capacity-which would help his constituency? SOmeone should have asked Barack Obama, while he was courting the UAW vote (like he actually has to work for this) why he supports increasing CAFE standards which will put those same UAW Obama supporters out of Work? 2 years from now we will be wishing gas was only $3 per gallon.
Mar 19, 2008 at 9:44 a.m.
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garyprimer is correct. Gas is 12 cents/gallon in Venezuela.
http://money.cnn.com/pf/features/lists/g...
Are you convinced now, Northman?
Mar 19, 2008 at 9:28 a.m.
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I am not absolutely sure, but I seem to recall reading that in Venezuela, home of Hugo Chavez, the price of gasoline was 12 cents per gallon until quite recently and that people were upset that is was rising. I see on CNN Money world gas prices that the current price is 14 cents per gallon. Guess I'll drive down there and fill up the tank. Venezuela seems to be the only place in the world with such prices, all other listings are over one dollar per gallon.
Mar 19, 2008 at 8:43 a.m.
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I would love to know in which country you can buy gas for pennies a gallon. Not in Canada, even when the exchange rate was favorable it was more expensive there. Certainly not anywhere in Europe! Not in Australia, Japan, Korea . . .
Let's not make utterly ridiculous claims, especially to support even more ridiculous "the government wants all your money"! Sheesh!
Mar 19, 2008 at 8:09 a.m.
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Who makes the most from 1 gallon of gas? The state of Wisconsin does. Wisconsin has the highest gas tax at 32.9 cents per gallon.
http://www.wisconsingasprices.com/tax_in...
The State of WI also has a minimum mark up law that prevents gas stations from competing.
The federal government gets 18.4 cents per gallon.
http://www.gaspricewatch.com/usgastaxes....
The oil companies get about 10 cents per gallon (when times are good).
http://www.pbs.org/newshour/bb/business/...
So the real winner is the State of WI and the losers are the tax payers. We need legislators to repeal the minimum markup law and reduce the gas tax.
Mar 19, 2008 at 7:54 a.m.
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Everyone has a right to their opinion. Stop making fun of someone's spelling! Not everyone is a scholar or able to read and write like one! As far as gas goes why is it other countries are paying a few cents a gallon and we are paying several dollars? Check with our goverment? They are filling up their pockets with our money. I doubt it has anything to do do with shortages. Its politics. They want to keep the money for themselves and the rich get richer and the poor stay poor.
Mar 19, 2008 at 7:46 a.m.
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Two ways to reduce gas prices: Reduce the demand or increase the supply. Demand can be lowered by things like car pooling. Supply can be increased by drilling for oil in ANWAR. But the environmentalists don't want us to drill in ANWAR because then the caribou might have to jump over a pipe.
Mar 19, 2008 at 6:36 a.m.
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Too many deep pockets in Washington.....
Mar 19, 2008 at 4:01 a.m.
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Exactly Seabee.
But China can drill in the gulf right off the US coast. Ironic huh?
Mar 18, 2008 at 11:35 p.m.
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Too bad we cant drill for oil right here in our country, or off our shores.
Mar 18, 2008 at 10:44 p.m.
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hey folks take it easy on unknown. By the looks of his spelling and grammar, he is not old enough to drive yet.
Mar 18, 2008 at 9:48 p.m.
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Stop using cards? Easy for you to say. My card gives me 5% cash back on gas purchases - so that is about a $.16/gallon discount at today's prices. Not a lot, but it helps. Give me the same cash discount and I'll stop using the card.
Mar 18, 2008 at 9:44 p.m.
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Everyone should just "do the right thing" and stop using cards.
Its nothing but a business-targeted theft racket.
There really needs to be more information out there about this.
Mar 18, 2008 at 6:43 p.m.
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You should get a cash discount if you use cash on anything you buy with cash.
Mar 18, 2008 at 5:05 p.m.
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jade is right you should learn to spell and use proper grammar
Mar 18, 2008 at 12:17 p.m.
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Someone should spend less time driving and more time learning how to spell.
Mar 18, 2008 at 9:33 a.m.
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"Sometimes our whole margin on gas goes to the credit card company"
What a travesty!!
This amounts to no less than legal theft from businesses.
STOP using CREDIT CARDS whenever you can.
Its just the RIGHT THING TO DO.
Thank you.
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