Oil Companies Taking ‘Service’ Out of the Gas Station Business
Just like “Murph,” the friendly Unocal 76 dealer in the TV commercials, Charley Webster has built a successful business by offering his Palos Verdes Peninsula customers old-fashioned auto service and repair.
But Webster, 35, fears that Unocal won’t renew the lease on his station in Rolling Hills Estates when the agreement expires next year. He is caught in a trend in which oil companies are closing stations or converting them to more profitable self-serve outlets. At least four of the 11 stations on the peninsula are unlikely to have their leases renewed in the next two years.
“There is no more service in service station. The meaning of the word’s been lost,” said Gene Walton, longtime operator of two traditional Shell stations on the peninsula. He says the big suppliers are forcing independent, service-oriented operators to change or close shop.
Oil industry officials say the era of the traditional neighborhood station has ended.
“The average consumer is looking primarily for the lowest price . . . and is willing to give up some services to get it,” said Edward G. Reilly, senior vice president for marketing for Arco, which pioneered in substituting mini-marts for car care.
The number of service stations in California has dropped from 22,000 in 1973 to 11,600 today, according to the California Service Station and Auto Repair Assn. In Southern California, only a third of gas stations operate as traditional stations with service bays for automotive care and repair, according to the Lundberg Survey, an industry reporting service.
Two things caused this sharp decline, the association said. Escalating land values and higher rents have forced stations off valuable property. At the same time, oil companies moved to boost profits by closing some stations and not renewing the leases of others that were then converted to high-volume, self-serve outlets.
The peninsula, which includes four cities with a population totaling 67,000, is unusual in that all of its 11 gas stations also offer auto servicing.
Rancho Palos Verdes, the largest peninsula city with a population of 42,000, has only six stations, down from 10 in 1975. In Palos Verdes Estates, where the president of Arco and a number of other top oil company executives live, there is only one station--and it will lose its lease next month.
The plight of independent service station operators has caught the attention of civic activists such as Ronald H. Stankey, an insurance executive who is one of Webster’s patrons.
“There’s a concerted effort by the oil companies to close stations, and it’s not just Unocal 76 either,” Stankey said.
He and other members of a civic action group calling itself PV-2000, say they will take up the fight to save these disappearing service stations, just as San Francisco has done. That city was losing a station a month until it adopted an ordinance preventing the closure of profitable stations.
On the peninsula, the closure of stations has a financial impact on cities already hard hit by recession and falling tax revenues.
The prospect of losing Webster’s station in Rolling Hills Estates worries city officials. In addition to providing needed services, the four stations pay $116,000 in city sales and business taxes, they said.
Unocal makes no bones about its consolidation plans. The company has notified 300 stations in California that their three-year leases will not be renewed. To improve profits, the company wants fewer stations that pump more gas, a spokesman said.
Historically, oil companies have made profits from gasoline sales and station rents, while independent operators such as Webster make most of their money in the service bays, where they do everything from tire changing to major overhauls.
In recent years, companies such as Arco have pressured service station operators to convert the service bays into franchised mini-markets, car washes or smog check stations, the operators say. They have resisted the changes because, under the oil company contracts, they must give up 20% or more of their service bay profits in franchise fees and other charges.
“That’s where we make our money--in the back room, not out pumping gas. Our business is built on customer service, not gasoline volume,” Webster said.
The price he pays Unocal for gas is so high that there is little room for profit there if he wants to stay competitive, he said.
Until recently, Unocal had stayed away from efforts to take over the service bays, and dealers such as Webster were glad to be with the company. Then came the word that Unocal was closing 300 small neighborhood stations.
The news hit hard on the peninsula, where four of the seven Unocal stations are losing their leases. Two are in Rancho Palos Verdes, one in Rolling Hills Estates and the fourth is the lone station left in Palos Verdes Estates.
Three of the stations to be closed are on land owned by Unocal. Two of the station operators say they want to buy the property from Unocal and switch brands. They have that right, under federal law, but the law also requires Unocal to clean up any toxic wastes that contaminate the sites before the property can be sold.
The three sites are contaminated, and the cleanup process can take up to five years, a company official said, making it virtually impossible for the current dealers to stay in business.
Webster’s Unocal lease on Silver Spur Road falls into a different category. The land is owned by a third party and leased by Unocal. Webster has a sublease from Unocal that expires next year. Unocal’s master lease expires in 1995, and the owner has informed Unocal that it will not be renewed.
“If we can’t renew our lease, we won’t renew his,” Unocal spokesman Barry Lane said.
That leaves Webster dangling in the winds of uncertainty.
“I’ve been laying awake nights, worrying about my lease. . . . I’ve paid my dues here, I’m making money here,” Webster said. Wiping grease from his hands, he added, “The issue isn’t pumping gas, it’s who’s going to service these cars?”
