Are Independent Gas Stations a Dying Breed?

Friday, April 19, 2002

Gas station owners claim they're being run out of business by their own oil companies. The so-called "independent operators" say oil suppliers want to see the end of small, locally owned filling station. They also warn that consumers will ultimately pay the price. 90.3 WCPN's Mike West has the story.

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Mike West: Years ago this was a familiar sound - you pulled up to the pump and a cheerful gas station attendant would ďfill Ďer up,Ē check the oil and put air in the tires. At that time most oil companies only worried about finding oil, refining it and selling to there network of service stations. But times have changed. Jay Linn owns two northeast Ohio Marathon gas stations. He says itís hard to keep his pumps running because profits are shrinking even as prices have risen. Linn says the problem began when big oil companies decided to run there own gas stations.

Jay Linn: The beginning of this started with self serve gasoline. When they could operate a station with 30 or 40 hoses and they could operate it with one low-income employee, one very inexpensive employee.

MW: His gas station still offers a full-service pump for customers willing to pay a little extra to have someone else fill the car, or the disabled and elderly who have a hard time wrestling with fuel hoses. He also offers mechanical work at his two stations. But Linn and other independents insist that even with extra sources of income they still depend on selling gas.

Jerry Douglas owns this Marathon station in Olmstead Township.

Jerry Douglas: A typical older service station, itís been updated, but it doesnít have the glamorous glow of a BP with the automatic doors and a thousand pumps and the lights on all day because we canít afford to do that.

MW: Douglas says itís not unusual to pay up to a dime a gallon more for wholesale than the prices gas is being sold for retail at other gas outlets including BP and Marathonís discount Speedway stations.

JD: The playing field is not level - we feel that something has to be done or were all going to disappear.

MW: Douglas and other members of the Northern Ohio Automotive Services Association insist the current pricing system is part of a plan by Marathon and others to get them out of the way. He says BP has already eliminated all their Cleveland area independent stations and other oil giants including Marathon donít care about the little guy.

JD: No, they donít care at all, I mean, why would my own company, why would Marathon/Ashland sell below my cost after Iíve been a devoted dealer for 21 years. It makes no sense, they donít want us here, they want (to get) rid of us.

MW: But Marathon executives insist they are not trying to get kill-off independent gas station owners. Chuck Rice is a spokesman for Marathon Oil.

Chuck Rice: Of course we value our independent brand jobbers and marketers, we do not discuss the details of propriety incentives offered to carry our brand, but itís important for us to have a brand out there.

MW: Marathon blames increased competition from big box stores for part of the problem. Rice says company-run stations need to sell gas cheaply because big box chains stores and discount chains have entered the market. He suggests small gas station owners think ďoutside the pump.Ē

CR: The key at this point is finding other ways to generate revenue, gasoline again is a commodity so some folks found others ways to generate revenues such as offering automotive repair and services, some invest in their convenience store items and offerings like delis and ice creams even fast food offerings like co-branding with Burger King and Subway.

MW: But at least one small business expert believes the oil companies could be making a big mistake. Corporate leaders in other industries have also tried to sell their goods retail with sometimes disastrous results.

Ernesto Poza is a professor at the Weatheread School of Management and is the director of the schoolís Family Business program. He points to large hotel chains that bought up hotels only to find it was difficult to run the ďday to dayĒ operations of every single hotel they took over. Coca-Cola is another example. Poza says the company once bought out many of their local bottlers and have since reversed changed that policy.

Ernesto Poza: When large companies begin to lose their focus because they are trying to do too many things sooner or later they discover that opens them up to other vulnerabilities where others can then compete with them. And then they have to choose whether they want to continue to do this, in this case retailing also. Or whether they realize that retailing is a lot harder than they thought it was gonna be and they might as well concentrate in exploration and production only.

MW: Independent gas station owners say if they all go out of business, the major oil companies will be free to fix prices and sell gas for whatever price they choose. Poza does not agree.

EP: I think that in general, what people think is that the reason itís being done is so as to improve margins and conceivably even set prices, which would be illegal of course. In my experience, thatís really not the motivation for this kind of consolidation. Most of the people who have gone to taking control over distribution or retailing, do that either to increase volume or get paid sooner, improve their cash flow.

MW: Gas stations are evolving into a combination restaurants, convienience stores and coffee shops. But gas station owner Jerry Douglas says heís set on running a traditional mom and pop operation.

JD: Iíll stay here as long as I can keep the doors open, Iíll be right here doing it. Iím not giving up, weíre going to fight to the very finish. It might be useless, but weíre gonna try.

MW: Members of the Northern Ohio Automotive Services Assocaition say something more than gas pumps will be lost if their numbers continue to dwindle. They say local gas station operators are part of the community. Familiar faces who know their customers by name, are willing to help with repairs, and do a little extra for the elderly or physically challenged. In Cleveland, Mike West, 90.3 WCPN News.