Pumped Out

Major gas companies are driving away independent station operators, all in the name of greed

"I really hope something can be done for those of us that gave our lives to this miserable business."


Name-Calling at the Pump

Texaco is making it impossible for independent dealers such as Greg Kraft to stay alive. Kraft shut down his service station at Forest Lane and Webb Chapel Road earlier this month.
Michael Hogue
Texaco is making it impossible for independent dealers such as Greg Kraft to stay alive. Kraft shut down his service station at Forest Lane and Webb Chapel Road earlier this month.
The neighborhood service station is disappearing -- and the big oil companies are glad to see them go.
Paolo Vescia
The neighborhood service station is disappearing -- and the big oil companies are glad to see them go.

Getting into the gas business used to be a simple proposition. A prospective dealer would hook up with a brand, go to training school, buy out another dealer or maybe even be given a vacant station by the company, and start pumping. Most were lessee dealers, who rented stations from their gas supplier but operated them independently and kept the profits. Lessee dealers, the focus of this feature article, are a dying breed. Their precise numbers aren't known, because the major oil companies stopped reporting the information in the mid- and late 1990s, but the trend is still clear.

So what's replacing them? Thousands of older, outmoded facilities have been razed, and many of the dealers have retired or gotten out of the business. But lessee dealers aren't the only kind of station operators, and now the majority of the nation's gas stations are being run by a different type of animal.

Lessee dealers who have lost their stations often see them reopened as company-ops. Major oil companies or convenience store chains often build and run their own stations and hire salaried employees to manage them. Years ago the companies tried to operate their own repair shops but proved incompetent and lost money. Today the only company operations are convenience stores.

A more recent innovation in gas retailing is the commission operator or contractor, who manages a station in exchange for a penny or two per gallon, all or part of the convenience store revenue or a monthly stipend, out of which the operator must pay all expenses. Most significant, the company provides and pays for all the gas--and gets to set the retail price. Lately Shell has been furiously converting stations abandoned by dealers into commission-ops. Companies like to call the commission operators "dealers," though dealer organizations have another name: "serfs."

Given their vulnerability, most lessee dealers would prefer to become open dealers, who own the property (or lease it directly from a third party) as well as the business. Open dealers can "brand" with any company they choose, subject to contractual terms, which gives them more leverage when their brander starts acting up. Under the federal Petroleum Marketing Practices Act, companies wishing to sell or shutter their lessee-dealer stations first must offer them to the dealers, who buy if they can afford the facility. Chevron in particular has sold hundreds of stations to dealers since announcing it wanted out of the lessee-dealer business.

While most lessee dealers and open dealers are supplied directly by their brands, some are supplied by jobbers, wholesale distributors who often own their own stations as well. Jobbers tend to serve outlying markets that the majors find inefficient to supply, though recently several refiners have turned over entire metro areas to big jobbers, who absorb a few cents a gallon and the management headaches.


"They Got Hosed in Dallas"

First thing every morning, Houston attorney Rob Steinberg arrives at his office and flips the switch on the toy known as Death Row Marv. Sitting in an electric chair with his limbs bound and electrodes fastened to his body, Marv gets the shock of his life. Across the victim's plastic chest, Steinberg has taped a new name: Shell. "I want to get back our pound of flesh for these dealers," he says. "It charges me up."

Steinberg, whose "The Bulldog" T-shirt and leather motorcycle pants speak for themselves, is one of an expanding army of lawyers filing state and federal lawsuits against Shell on behalf of dealers across the country. His firm is also going after Exxon in a federal antitrust and fraud suit in Corpus Christi that was in trial at press time. Among his Shell clients are a group of Dallas dealers that includes Ghanam Akshar and Tommy Vo. "They got hosed in Dallas," Steinberg says.

It's not easy to sue a major oil company, no matter how obvious the transgression. With a seemingly unlimited legal budget, a Shell or an Exxon can throw banks of lawyers and other resources at a case that the cash-strapped dealers can't possibly afford to match. Even when the dealers' attorney works on contingency, as Steinberg does, the company can delay and obfuscate for years with relative impunity. In two Exxon cases reviewed by the Houston Press, the list of motions alone ran more than 100 pages. "Their attitude is, 'We're Exxon, you're nothing, fuck you,'" Steinberg says.

Invariably, the companies request that documents and testimony produced in a dealer case be sealed, claiming that the release of proprietary information could damage their business. In the event that the cases settle before trial, the seal becomes permanent. But because of clerical errors, key documents in the Corpus case and another in Florida were left temporarily unprotected. Together they paint a picture of a company hell-bent on removing dealers and replacing them with company-ops and wholesale distributors. In South Texas, for example, Exxon planned to cut its lessee-dealer population in half by 2003 while doubling the number of company-ops.

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