Report: Big Oil Squeezing Dealers

CLEVELAND--Big oil has been greasing the skid of dealer-owned service stations in neighborhoods throughout the country, according to a report in The Scene weekly.

Dealers interviewed say the policies of the large oil companies have cut drastically into their profits or put them out of business entirely. Dealers who had invested in turning their service stations into convenience stores have been particularly hard hit by hardball tactics, according to the article

The piece, headlined “Pump and Circumstance,” was written by Bob Burtman, who said that “a five-month investigation by Scene shows dealers may be right. A review of thousands of pages of internal company documents, court records, and legislative testimony, as well as interviews with more than a dozen current and former company employees, leads to an inescapable conclusion: Big oil has in fact been deliberately and systematically driving dealers out of business. In several cases, documents expressly target dealers for removal, with specific reduction goals. Although dealers have protection under the law, the companies have found ways to circumvent it, including:

• Raising station rents 300 percent and more, instantly forcing dozens of dealers to close and shoving hundreds more to the brink;

• Withholding credit card reimbursements, as much as $100,000, resulting in serious cash-flow problems;

• Offering dealers take-it-or-leave-it lease renewals that include restrictions on reselling their businesses (thereby devaluing them) and blanket waivers of their legal rights;

• Charging dealers different amounts for gas in the same metro area--as much as 12 cents a gallon--by putting them in different “zones,” making it difficult or impossible for those in high-cost zones to compete; and

• Building spacious new company-run stations with convenience store, car wash, and other amenities close to existing dealer-run stations--then undercutting the dealers’ prices.”

Dealers told the publication that, in particular, ExxonMobil, Shell, Texaco, Chevron, and BP Amoco have been aggressive in their policies, “strong-arming their own dealers for bigger profits,” the paper reports.

“None of the major oil companies contacted by Scene would agree to an interview,” according to Burtman.

The piece notes that “the small-business owners across the country who have been the face of gas retailing for decades say something more than a changing marketplace is threatening their existence. They say they’re perfectly capable of thriving in modern times, given the chance to compete. Most have invested in new technology, and many have borrowed heavily to upgrade their stations or to convert older repair facilities to convenience stores with car washes.

“‘The objective is to get the dealer out of the network, period,’ says Los Angeles-area dealer George Mayer. At the same location for 26 years, Mayer is taking a beating from a recent rent hike compounded by wholesale gas costs higher than his competition’s. ‘My [repair] business stays busy,’ he says. ‘Otherwise, I wouldn’t still be here.’”

The article says that “in lockstep, the companies say they’re simply responding to changing market conditions, that new policies affecting dealers are designed to keep pace with the aggressive competition from the Wal-Marts and convenience store chains. Despite record profits the last two quarters, the majors say they make relatively little money selling gas. Yet documents show that, while the companies regularly demand new concessions from their dealers, they don’t make the same demands of their own company-run stations.”

To read the story in its entirety, contact www.clevescene.com/issues/2000-11-09/feature.html/printable_page