Station Owners Pump Fists at Oil Companies

A long-simmering battle between gasoline station owners and Big Oil is breaking out again in California.

The California Service Station and Automotive Repair Assn. on Tuesday accused major petroleum companies of artificially inflating pump prices -- which hit a record $2.145 a gallon in the state March 17 -- by refusing to allow stations to shop around for the best wholesale deals. And, raising the stakes in the feud, the association sent a contingent to Sacramento to lobby for legislation that would significantly ease restrictions on wholesale purchases.

“This is not a rebellion, but we’re being forced out of business,” said Dennis DeCota, executive director of the association, who runs a 76 brand dealership in Marin County.

One of the bills endorsed by the association was voted down Tuesday in the Assembly Business and Professions Committee.

The other was approved by the Senate Energy, Utilities and Communications Committee, though political observers said it would struggle for “yes” votes in the full chamber. Similar legislation in recent years never passed.

But the dealers’ association, whose members own 620 independent and branded gas stations in California, said it wouldn’t give up.

The sponsor of the bill that died in committee, Assemblywoman Christine Kehoe (D-San Diego), said she wouldn’t abandon the issue and planned to ask Assembly Speaker Herb Wesson (D-Culver City) to form a select committee on gas prices.

Her bill would have eliminated what is known as zone pricing, in which oil companies set the range of prices that their branded dealers are allowed to charge motorists for gas in specific geographic areas.

The bill also would have permitted these dealers to shop around on the wholesale gas market; now, they must buy from the oil company whose name their gas carries.

Senate Bill 302, by state Sen. Bill Morrow (R-Oceanside), seeks to prevent what he calls further dominance of the retail market by oil companies.

It would force major oil refiners, such as ChevronTexaco Corp., to charge privately owned stations and company-owned stations the same price for wholesale gas. In addition, the bill would prevent refiners from buying out independent service station dealers who sell the refiners’ products and converting the stations to company-owned outlets.

In Sacramento on Tuesday, the service station association charged that lack of competition was the primary reason California’s gasoline prices are far above the national average.

Jeff Wilson, spokesman for Western States Petroleum Assn., an oil industry trade group whose members include ChevronTexaco and Exxon Mobil Corp., among others, rejects the notion that oil companies control retail prices.

The trade group says pump prices are determined by market forces, including supply and demand, as well as competition.

“The bottom line is that these bills are intended to increase competition and bring down gas prices, but they won’t work,” Wilson said. “Neither of these bills will bring any additional supplies into the state, and that’s the real problem.”

The two sides last publicly tangled over legislative reform in 1999 and 2000, when similar bills were introduced on the heels of a major gas price increase. Those efforts ended in defeat, despite backing from consumer groups, dealers, the California attorney general and others.

This time, Michael Shames, executive director of the Utility Consumers’ Action Network, said he saw some progress for UCAN’s side in the fight.

“I was at the 1999 hearing, and the reception was downright antagonistic,” Shames said. On Tuesday, “it was a much friendlier hearing ... even the Republicans were sympathetic to the fact that there is a problem, so I was pleased.”

Kehoe said her bill died Tuesday because of opposition from oil companies.

“I knew it would be an uphill climb, but I was hoping we could get lucky,” she said.

“It just shows you that the stakes are very high. The oil companies are not going to let these bills get through.”

Gas station owners, she noted, are backing reforms because “they know they’re on the short end of the stick, and their hands are tied” through restrictive contracts with refiners that sometimes dictate retail prices.

Kehoe and others have been frustrated by California gas prices, which tend to be higher than those elsewhere in the U.S.

According to the most recent government survey, the average price for regular gas was $1.928 a gallon in California -- 41.5 cents higher than the national average of $1.513.

The oil industry and others say pump prices in California reflect the unique state-mandated gasoline formula, a shortage of in-state refinery capacity and California’s relative isolation from out-of-state gasoline supplies.

Shames and others, however, contend that the higher prices reflect the greater dominance of oil companies in California, where more than 80% of gas stations are branded and refineries operated by the major oil firms supply most of the gas.

Associated Press was used in compiling this report.