Trump-promoted discount gas stations fuel a mystery and questions
The "Freedom Fuel Network" is selling gas for $3.47 a gallon.
President Donald Trump earlier this month praised a "very smart retailer" called the Freedom Fuel Network in the Philadelphia area for voluntarily lowering the price of gas to $3.47 a gallon, undercutting the state average by about 50 cents.
While the network lists 25 gas stations throughout Pennsylvania and New Jersey, a review of public records found scant information about the Freedom Fuel Network, and industry analysts have raised doubts that the stations could profitably sell fuel at that price point, with one expert describing the business model as "jumping off a cliff."
"President Trump is leading the charge to lower gas prices this summer -- putting more money in your pocket," the White House said on social media, saying the stations are "lowering the price at the pump to $3.47 for our 47th President."
According to industry data reviewed by ABC News, selling gas at that price point, under the current market conditions, would likely eliminate any profit and potentially cost the 25 participating stations a total of more than quarter million dollars every month. The Freedom Fuel Network has not publicly disclosed its business strategy, and at least two major petroleum companies have distanced themselves from the White House-promoted operation.
A White House official told ABC News that the Freedom Fuel Network is a private company not associated with the president, that is "simply reducing their margin to make prices at the pump more affordable for drivers in Philadelphia and New Jersey."
"The Administration is not involved in the company, nor has the Administration given the company any funding. There is no other entity or person subsidizing the lower gasoline costs," the official said.
'They love the USA'
Trump's support for the Freedom Fuel Network comes as oil prices spike amid the escalating conflict in Iran. On social media last month, Trump criticized "big oil companies" for not reducing gas prices at the same rate as crude oil, directing the Department of Justice to investigate oil firms.
While many customers at a Freedom Fuel Network station in Drescher, Pennsylvania, on Thursday celebrated the low prices, some wondered how the station can sell gas at an apparent loss.
"I want Americans to be asking, 'Where is that money coming from? Why are corporations and businesses willing to subsidize gas 50 cents a gallon for people, to make President Trump look good?" local resident Tim Kerns told ABC News station WPVI.
No business with the name "Freedom Fuel Network" appears to be registered in either Pennsylvania or New Jersey, but a Delaware-based entity called "Freedom Fuel Network, LLC" applied for trademark on July 1 -- the same day that Trump promoted the discounted gas network on social media.
"On July 3rd, the Freedom Fuel Network will be lowering gas prices at 25 'FREEDOM FUEL' Stations across the Greater Philadelphia Area. This Retailer is taking the lead, and others should follow. They are doing this because they love the U.S.A." Trump wrote on July 1, adding that "gas prices will soon be back to the record low prices Americans enjoyed at the pump before our very successful 'excursion' in Iran."
According to the U.S. Trademark Office website, the Freedom Fuel Network lists its physical address as an office building in Delaware that serves as the registered agent for hundreds of thousands of businesses. The application says the company operates automotive service stations and convenience stores.
When reached for comment, an attorney who submitted the trademark application declined to provide any additional details about the company.
"Unfortunately, I am not authorized to disclose any information regarding this matter beyond what is officially included in the public database of the U.S. Trademark Office," Anna Vishev, an attorney based on Staten Island, New York, said in an email to ABC News.
'Jumping off a cliff'
The 25 gas stations listed on the Freedom Fuel Network's website -- five in New Jersey and 20 in Pennsylvania -- appear to be independently owned and operated, though eight were associated with national fuel companies over the last decade, according to Google Maps' Street View, including Shell, Sunoco, Gulf Exxon, Phillips 66 and Valero. Two of those companies responded to ABC News' requests for comment and distanced themselves from the Freedom Fuel Network.
"Shell is not affiliated with the Freedom Fuel Network and was not involved in its formation. We understand one location participating in the initiative was previously Shell-branded," a Shell representative said about a gas station in Brookhaven, Pennsylvania.
"Valero no longer supplies this site and is in the process of removing Valero branding from the location," a Valero representative said about a gas station in Bristol, Pennsylvania, associated with the Freedom Fuel Network.
It is unclear how long the Freedom Fuel Network plans to continue selling gas at $3.47 a gallon. The company did not immediately respond to ABC News' request for comment.
Industry experts ABC News spoke with expressed skepticism that the company can continue selling fuel at the $3.47 price point. According to Gas Buddy, the average price for a gallon of regular gas in Pennsylvania is $3.98, and the average price in New Jersey is $3.91.
Most gas companies already operating with tight margins, according to Tom Kloza, a petroleum analyst and chief energy adviser for Gulf Oil.
"The gross profit margin in the last few years has been just under 40 cents a gallon," said Kloza. "I emphasize gross because you know, you have to have credit card charges, labor, lighting, all sorts of different things that impact what you net out."
According to data from Dow Jones's Oil Price Information Service, the average rack price for regular gas -- the wholesale cost before gas is delivered to stations -- was $2.89 on July 3, when Trump said the promotion would begin. To break even -- including delivery costs, Pennsylvania's state gasoline tax of 57 cents per gallon, and the federal gas tax of 18 cents per gallon -- stations would need to sell gas for at least $3.64 per gallon.
Based on the OPIS data, participating Freedom Fuel Network stations that sell gas at $3.47 would lose at least 17 cents for every gallon of fuel they sell. If they sold 68,000 gallons a month -- approximately the national average according to Kloza -- the participating stations would lose at least $11,500 over the course of a month.
With gas prices spiking since July 3 amid the conflict in Iran, the losses would be even higher. The wholesale price of regular gas in Pennsylvania increased by 14 cents to $3.03 on July 9, according to OPIS. With oil prices rising, Kloza described the Freedom Fuel Network's business model as "jumping off a cliff."
'A tough business'
Kloza, however, also noted that gas stations have become more profitable in the last decade, with their gross profit margin doubling from about 20 cents per gallon to 40 cents. Cumberland Farms, a major chain of gas stations and convenience stores, recently filed to become a public company, and Costco recently began to launch standalone gas stations. Some stations in Pennsylvania -- particularly high-volume gas stations like BJ's and Costco -- have also recently been able to sell fuel cheaper than Freedom Fuel Network.
"It always was a tough business, and it's still a tough business, but it's been much more lucrative this decade than prior, and that's one of the reasons why you're seeing some retailers go public," said Kloza.
Kloza also said that the stations may be able to make back some of their money through their convenience stores, and suggested the $3.47 price could be a broader promotional effort to attract customers. Last month, T-Mobile partnered with Shell to sell $1.99 gas at stations in Los Angeles, Houston, and Chicago as part of an anniversary promotion.
Trump's public praise of the Freedom Fuel Network came the same time that the Department of Justice announced that it was "closely monitoring petroleum markets and gas prices and will take all appropriate measures to stop illegal conduct contributing to high gas prices."
In a letter to state attorneys general on July 3, DOJ Associate Attorney General Stanley Woodward and Federal Trade Commission Chairman Andrew Ferguson directly cited a social media post from Trump -- in which he directed the DOJ to investigate oil companies for price gouging -- and called on states to investigate why gas prices have not come down at the same rate that crude oil has.
"Although crude oil prices are now dropping rapidly, far too much of that price cut is being withheld from Americans when they pay for gasoline," the letter said, urging states to "use all tools available under your state laws to investigate and prosecute any misconduct causing unjustified price increase."
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