The Last Service Station

Why did the big oil companies want to put Ron Gregory and other independent operators out of business? That's right, to pad their profits.

Read Part 2

When Ron Gregory first leased his Hollywood Shell station in 1994, he had high hopes. The station was rundown, and the price he paid the former dealer seemed steep at $155,000, but Gregory had a promise from his area manager in Miami that it would be rebuilt into a convenience store with a car wash. He had no reason to doubt Shell, which had an excellent reputation. Besides, he'd seen the blueprints, and Shell had pulled the permits for the job. The company had even sent Gregory to a special training school in Houston at its expense to learn to manage the modern facility. “The only reason I bought it was because they were gonna rebuild it,” he recalls.

But the months dragged on with no renovation. In 1995 Gregory lost $65,000. The next year he was informed that Shell, which had leased the property from a third party, did not plan to renew the lease. Gregory hired a lawyer and insisted Shell reimburse him for his investment, which had climbed to $310,000, or get him another station. The company chose the latter, and in 1997, he moved into a station in Perrine. In honor of his supplier, he named his new corporation BMO Petroleum, for Bend Me Over.

He made decent money for more than a year, but Gregory soon noticed that his wholesale gas price was higher than his competition's. The RaceTrac across the street, in fact, often priced below his cost, stealing his customers and cutting his sales in half. His rep promised a price break every time Gregory complained, but little was forthcoming. “Basically it was one friggin' lie after another,” he says.

Then, in August 1998, the letter arrived: Shell was canceling its long-standing rent-rebate program. Gregory's monthly bills doubled, and though he hung on for a while, his bottom line went red. This past February he closed his doors and walked away, bitter. “I'd run out of gas before I'd stop at a Shell,” he says.

Gregory isn't the only dealer who has lost his business in the last several years. Amoco, South Florida's most prominent gas retailer, has replaced some of its most venerable dealers with stations run by company employees. Richmond Heights Texaco dealer Russ Grande, Sr., who owns his own station, can walk across the street and buy gas for less than he pays wholesale. If that situation continues, Grande says, he'll have a hard time staying open. “The oil companies have deep pockets,” he says, “and they're trying to get us out.”

The neighborhood service station, once as bedrock a community institution as the local hardware store and corner grocery, is disappearing. Attendants who once greeted motorists, filled their tanks, and checked their oil have become obsolete in the age of self-service. As cars have become more complex, and a plethora of brake, muffler, and lube shops have evolved to meet demand, once-bustling gas-station repair bays have been leveled or have become musty with disuse. Convenience store chains added pumps in the Seventies and Eighties, capturing a huge share of the market. Recently megaretailers such as Wal-Mart and Albertson's have entered the gas business, selling cheap to draw customers and further strangle the old-timers.

But the small-business owners across the nation 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 convert older repair facilities to convenience stores and add car washes.

Instead, the dealers charge, the big oil companies that dominate the industry -- in particular ExxonMobil, Shell, Texaco, Chevron, and BP Amoco -- are forcing them out of business. “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 points out. “Otherwise I wouldn't still be here.”

The stakes are high. For the dealers, whose numbers still are measured in thousands, it's a matter of survival. For the oil companies, it's a matter of maximizing revenues -- dealer profits have long tantalized company executives. The easiest ways to extract the cash are by jacking up rents and fees or simply taking over the stations and running them with cheap labor.

But the implications of ridding the landscape of service-station dealers are much broader. Independent dealers who can set their own street prices obstruct the ability of the major industry players to manipulate prices freely. And though industry leaders reject the notion that the companies have the power to push up prices at will, the motivation is certainly there: In the United States, a one-cent increase in the retail price of gas would be worth about $1.2 billion annually to the industry. “The majors are going after their own to gain control of the pumps,” says Tim Hamilton, a consultant to several West Coast dealer organizations. “They want your wallet.”

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