Paying the Price

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

Coming off the graveyard shift at his Mobil station in Scottsdale, Tom Van Boven looks the way he feels. Van Boven would prefer not to work 16 hours a day, but he had to lay off half his help last Christmas to make ends meet. Business is still slow, though, and he doesn't know how much longer he can hang on.

Just a few years ago Van Boven couldn't imagine these straits. In 1982, he'd leased a marginal station that had been selling 30,000 gallons of gas a month and built it into a thriving enterprise moving 190,000 gallons monthly, with three mechanics and a bustling snack shop. A three-time winner of Mobil's prestigious Pegasus Circle of Excellence award, he hardly had enough room in his cramped office for the various honors the company bestowed upon him. "I've got plaques all over my wall, trophies, you name it," he says.

Van Boven was doing so well that when another dealer offered him $750,000 for the station, he declined.

Bill Reed says he "bled yellow" as a Shell employee for 21 years, but the company pushed him out of business after he retired and opened his own station.
Bill Reed says he "bled yellow" as a Shell employee for 21 years, but the company pushed him out of business after he retired and opened his own station.
Bill Reed says he "bled yellow" as a Shell employee for 21 years, but the company pushed him out of business after he retired and opened his own station.
Paolo Vescia
Bill Reed says he "bled yellow" as a Shell employee for 21 years, but the company pushed him out of business after he retired and opened his own station.

But about 18 months ago, Mobil's attitude changed.

Van Boven's gas cost began to climb, and a company-run station one mile away started undercutting him. Located in a high-priced zone, he learned he was paying 10 cents a gallon more than a fellow Mobil dealer three miles away. The Exxon station across the street began pricing under his cost, and when he asked for help in order to compete, none was forthcoming. His volume dropped by almost a third. "I can't survive this much longer," Van Boven says.For most of his tenure, Van Boven had ordered gas when he needed it. But Mobil changed its policy and delivered loads on its own timetable, while he still had plenty in the ground. And the company began withholding his credit-card reimbursements, crunching his cash flow. Eventually his account ran dry.

Phoenix dealer Dave Saifi tells a similar story, although his station at the intersection of Central Avenue and Colter Street flies the Texaco flag. The company eliminated its rent rebate program, doubling his monthly payment. A nearby Arco sells below his cost, and a Texaco company-run store a mile and a half from him also prices low. But his pleas for a price break have gone unheard, and business has dipped.

At least Van Boven and Saifi are still in business. Mesa Exxon dealer Mike Bain turned his leased station back to the company a year ago after digging himself an $80,000 hole. "I was at a point where I was gonna have to pump more money into it [to keep it open]," Bain says. "I chose not to do that."

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 1970s and '80s and captured a huge share of the market. Recently, mega-retailers such as Wal-Mart and Albertsons have entered the gas business, selling cheap to draw customers and further strangle the old-timers.

But the small-business owners across the country 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 to 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 says. "Otherwise, I wouldn't still be here."

The stakes are high. For the dealers, whose numbers are still 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 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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