In order to better understand how various types of fraud take place, the supply chain which enables it needs to be understood.
Refineries convert crude oil into useable fuel products. Refineries sell product through their own rack distribution system or to terminal operators and independent distributors for distribution. Gasoline can also be loaded by trucks and transferred directly to retail outlets (like gas stations). There are 148 refineries in the United States.
Terminals, more commonly referred to as “the rack” receive product (gasoline, diesel, kerosene etc…) by pipeline, rail, barge, or truck transports from refineries. Terminals provide temporary storage for distribution to bulk plants and large commercial accounts. Terminals can be owned and operated by oil companies, refiners, independent operators, and direct distributors. There are 1,400 terminals in the United States.
Bulk plants serve as an extension of terminals and are often owned by independent operators and direct distributors (wholesalers). Bulk plants receive their shipments by truck or rail either from refineries or terminals. Bulk plants serve smaller commercial accounts or retail outlets. In some cases, bulk plants operate as middlemen distributors who resell product to another wholesaler who then sells the product to retailer, industrial or agriculture end users. Current numbers are difficult to find but in 1995, there were nearly 5,200 bulk plants according to EIA reports.
Gas stations make up the majority of retail outlets which provide fuel for the public. As of January 2017, there were a little over 150,000 gas stations in the U.S. (123,807 of them also have convenience stores according to the Association for Convenience & Fuel Retailing -NACS) serving 260.4 million registered vehicles. On average, 40 million drivers fill up each day with an average of 9.8 gallons. Currently, retailers make far more profit on convenience items such as tobacco, food, and drinks as the average profit on a gallon of gas is just 4¢. With an average of 950,000 gallons of fuel sold per outlet in a year, profit on fuel only averages $38,141. The Federal government’s tax take on this same amount of fuel sold: $175,500.