JESUP -- Local fuel wholesalers know exactly who to blame for high gas prices.

It is certainly not them. Profit margins range from fractions of a cent to a few cents a gallon, wholesalers say, depending on the end customer.

"It's a fight every day to not lose money," said Denny Donlea, managing partner with Consolidated Energy Company, based in Jesup.

And it isn't the gas stations. Industry analysts say retail margins for fuel aren't much better. Sometimes, gas is considered a loss leader just to get people into the store to buy other higher-profit items.

"Retailers don't make money on gas. It's the pop and food," said Tami Foster, Iowa Department of Natural Resources energy analyst.

So, who is it?

Fuel wholesalers and their advocacy group, the Petroleum Marketers and Convenience Stores of Iowa, believe it is the fund managers and traders on Wall Street. Speculative trading is as much to blame for $3 per gallon gas as unrest in the Middle East and high demand.

"People blame the oil companies or they blame the Middle East. It's people that trade that jack up the price. It's our own people," said Perry Steinmeyer, owner of Waterloo Oil Co.

The public still doesn't understand how gas is priced, he said. People see the price at the pump and instinctively start blaming the last links in the supply chain instead of the beginning. Wholesalers say they're the least to blame.

It is no secret major oil companies are making record profits as of late.

Exxon Mobil Corp. said Thursday it earned $10.36 billion in the April-June period, the second largest quarterly profit ever recorded by a publicly traded U.S. company. The earnings figure was 36 percent above the profit it reported a year ago.

BP PLC announced Thursday its second-quarter profit rose 30 percent to $7.3 billion, while ConocoPhillips reported a 65 percent increase to $5.18 billion. Royal Dutch Shell PLC, said its second-quarter earnings jumped 40 percent as net profit rose to $7.32 billion.

But Steinmeyer said many people don't realize it is the nervous, profit-driven traders bidding up the price of gas at commodity exchanges. Using turmoil in the Middle East as an excuse, they've pushed gas prices as much as 60 cents per gallon higher in recent months, he estimates.

Donlea agrees speculative trading is driving prices higher than demand and supply dictate. He realizes the war in Iraq and the conflict between Israel and Hezbollah impacts oil prices, but not this much.

Government figures show crude oil stocks in the United States totaled 277.3 million barrels on July 25, 2003. Retail gas prices at the time averaged about $1.50 per gallon. A barrel of crude was just under $30.

Worldwide oil demand four years ago was 78.15 million barrels a day, according to the Energy Information Administration. It has since risen by 6 million barrels a day.

The country's latest crude oil stock report on June 9 shows 345.7 million barrels on hand. Yet, gas is nearly $2.90 per gallon at local stations.

"Now, investors are getting in there, driving it (gas prices) up and down," Donlea said.

Twenty years ago, he said a half-cent move a day was big. Now, a several cent swing in a matter of minutes isn't unusual. It is harder to determine when to buy fuel.

"The things we traditionally looked at -- inventory and weather -- are out the door," Donlea added. "Now if inventories are up, prices can go up as well. It should be the opposite."

Donlea and other Consolidated employees continually keep tabs on live gasoline trading on the New York Mercantile Exchange. Customers regularly call to get the latest quotes. Though the futures price isn't directly related to the current price at the pump, it indirectly impacts customers.

The change in the market from day to day will often reflect the change in what gasoline and diesel costs at the Magellan Pipeline terminal in Waterloo, where many wholesalers, or jobbers as they are called, fill up. Prices at the terminal sometimes change during the day, but are often good for a 24-hour period starting at 6 p.m.

"If we can get it (an 8,000-gallon tanker) loaded before 6, and save them 2 or 3 cents, that's about $250. (That) could be their margin," Donlea said.

Northeast Iowa fuel wholesalers are merely conduits for getting petroleum from major oil companies to gas stations, farmers and commercial customers, like construction crews.

Consolidated Energy is Northeast Iowa's largest jobber, and one of the larger ones in the Midwest. Several oil companies in Jesup, Independence, Winthrop, Manchester, La Porte City and Hudson merged starting seven years ago. It has since expanded into 13 states.

Donlea said selling fuel is a high volume, low margin business. The profit margin needed, while not disclosed for proprietary reasons, depends on how much handling and work is required. If a semi tanker loads fuel at a pipeline terminal and delivers it straight to a gas station, Donlea said, the profit is a fraction of a percent of the total bill. If fuel is delivered to the farm or construction site, it is handled several times. Area tank farms are needed, along with more equipment, so a higher price is required.

Consolidated buys from about two dozen major gasoline suppliers. The pipeline charge is already added into the price when the wholesaler purchases the fuel.

Donlea said the initial upward retail price movement is more based on the refined product and the downward movement is more based on competition. Wholesalers usually have a set profit margin. Steinmeyer said his margin hasn't changed in 15 years.

To prove the wholesalers' point on gas pricing, Donlea showed how much gas cost at the Waterloo terminal on July 21, ranging from $2.35 to $2.45 a gallon. That's without 40 cents per gallon in taxes and markup by distributors and retailers. At that time, local retailers were charging anywhere from $2.83 to $2.89 per gallon.

"We're the one constant (in the industry)," Donlea said.

Contact Matthew Wilde at (319) 291-1579 or matt.wilde@wcfcourier.com.