THE MIDEAST CRISIS: ASSESSING THE DAMAGE : Energy : Independent Gas Stations Feel the Pinch
Independent service station operators, who have already seen their market share dwindle in California, are finding their gasoline supplies limited and are paying higher prices than major brand service stations in the wake of the Iraqi invasion of Kuwait last week.
The problems follow the beating the independent marketers took earlier this summer when non-contract wholesale gasoline prices defied expectations by rising sharply on the West Coast while crude oil prices dropped.
This time, the price demanded by refiners supplying independent dealers is rising faster than the price charged by major oil companies to their own chains, placing the non-major service stations at a competitive disadvantage.
At the same time, refiners have been limiting the supplies of gasoline for sale to the independent dealers--not because there is a shortage but because the refiners don’t want to encourage hoarding, they say.
It all adds to the pressure on the smaller dealers, many of whom say they are now losing money on every gallon they sell to the public. And it is renewing cries by some dealers that the major oil companies have engineered the situation to drive more independents out of business. An “independent marketer” is one that is not affiliated formally with a major oil refiner.
In five counties of Southern California, independent stations saw their market share fall to 10.7% in March from about 21% in 1983, according to Whitney Leigh Corp., a Tulsa, Okla., market research firm. “What this will do is eliminate independent stations throughout the state real quick,” said Ron Appel, president of United Oil Co. in Carson, which operates 36 service stations.
The majors deny a plot and argue that the independent dealers are simply victims of the marketplace. “There just isn’t any spare gasoline out there to speak of,” said George Babikian, president of Atlantic Richfield Co.’s refining and marketing unit, the state’s No. 1 retailer. “There’s no conspiracy to keep production down . . . so that the independents have to pay higher prices.”
By Tuesday, the price of unleaded regular gasoline sold to independent marketers rose an average of 5.3 cents to 85.5 cents per gallon in California among those refiners who reported a change since last Friday, according to the Lundberg Survey, a North Hollywood firm that tracks gasoline prices nationwide. The price does not include transportation or taxes.
By comparison, the price major oil companies were charging their own dealers for unleaded regular gasoline in California rose only 3.5 cents to 85.3 cents per gallon among those companies who reported a change in price, the survey said. That price includes delivery, but not taxes.
At the pump, gasoline prices nationally now average about $1.201 per gallon, up 12.6 cents since Aug. 1, the American Automobile Assn. reported Tuesday. On the New York Mercantile Exchange, meanwhile, the price of crude oil for September delivery rose 26 cents Tuesday to close at $28.31 a barrel.
The independent dealers are victims of a phenomenon of the marketplace, said Trilby Lundberg, publisher of the Lundberg Survey.
Unlike major oil company service stations, which buy gasoline under contract from their oil companies, the independents must go to the open market for supplies. The prices of non-contract, unbranded gasoline react more quickly and more dramatically to world events or supply changes than do prices of major-brand, contract gasoline.
As a result of tight refining capacity on the West Coast--exacerbated by current mechanical troubles at the Powerine and Arco refineries, among others--prices tend to move quickly here whenever there is a potential threat to supplies, company officials said.
But that is small consolation to independent marketers. “The majors don’t have a problem; it’s the spot buyer who ends up behind the eight ball--people like us without a contract supply,” said Mark Conant, executive vice president of USA Petroleum, a Santa Monica company that operates more than 100 stations.
The small dealers also accuse independent refiners of limiting gasoline sales to drive up prices. Some refiners are saying that dealers can buy only as much gasoline as they have for the last six months or so; others are limiting purchases to 70% of previous sales.
The refiners deny the charges. “We’re just trying to control (sales) to what they are typically at this time of year to prevent people from trying to build up inventories in their own systems,” said Al Gualtieri, president of Powerine Oil Co., which operates a refinery in Santa Fe Springs.
