Paying the Price

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

Hamilton laughs at the idea that the marketplace is more competitive now. He points to the just-announced merger of Chevron and Texaco as well as the BP-Amoco-Arco melding. The same refineries that supply the big retailers also supply most of the smaller stations and can choose where to offer the breaks. Add to that the removal of thousands of independent dealers and a higher percentage of retail outlets controlled by the refiners. "How can you say that this is not a reduction in competition?" he asks. "The arguments make no rational sense."

"Look at their behavior," seconds Shelton, "and you can be sure their behavior is part of a plan."


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.

In his spacious Redwood City office bedecked with signed posters of sports stars, Bob Oyster leans back in his wheelchair and frowns reflectively. One of the Bay Area's most successful dealers, Oyster owns 25 Shell stations as well as his own historic building and other real estate. He wears the tooth-and-nail look of a man who has made his own way in life. "You know what I got out of the service stations if nothing else?" he says. "The knowledge of service."

Oyster is offended by the idea that he made too much money as a dealer, which he thinks is partly what drives the business-school suits now in charge of the Shell-Texaco alliance. "They want to talk about me cuttin' a fat hog on the service stations," he scoffs. "I worked 80 hours a week."

Like those of all Shell dealers, Oyster's rents abruptly increased with the cancellation of the Variable Rent Program and have continued to multiply since. "I've got about six stations I'm losing money at," he says.

But unlike many of his fellow dealers, he doesn't intend to let Shell get the upper hand. "I'll run 'em and lose money before I'll hand the keys over to Shell," Oyster says. Eventually, though, pressure from the company will grind profits down to the nub and he'll have to reduce his holdings in exchange for a more secure stake than the one he has now. His son has followed in his footsteps and intends to take over what's left when he retires. "If I didn't have him in the business, I'd tell Shell they could have it all," he says. "But he deserves more, and that's why I'll fight and do whatever I have to do. I think that for his lifetime, this could still be a good business."

The fatalistic edge to Oyster's tough talk is shared by even the most die-hard scrappers. They've seen the once-powerful dealer organizations lose their muscle as their ranks have dwindled, and have seen others go defunct. Those who remain know the odds. "The handwriting's on the wall," Oyster says.

The allegations of predatory practices, price gouging and other abuses have spawned investigations at the state and federal levels. Maryland has convened a task force to examine zone pricing. The California attorney general's office is studying that state's high prices, and the initial report raises some thorny questions. A Federal Trade Commission look at antitrust issues should be completed soon. An explosive Hawaii price-fixing case involving a whistle-blower has the companies squirming. And a batch of lawsuits led by formidable lawyers coast to coast has raised dealers' hopes that the outright plunder of their assets may be halted, that they'll get fair compensation for their years of hard work.

That would suit former Shell marketing chief Bill Schutzenhofer, who keeps in touch with many of the dealers he helped set up and has heard one disaster report after another. "If you don't want them, tell them you don't want them," he says. "Give them a fair price and buy them out, if that's what you want to do."

In the late 1990s Chevron notified its dealers that the company planned to move in a different marketing direction. The company set up a buyout fund for the stations it wanted for itself and for a while was willing to pay at least something for the value of the businesses, even if a 1997 rent hike reduced their worth. Others were given an opportunity to buy their properties and rebrand with another supplier. Though dealers can share plenty of Chevron horror stories, they generally appreciate the company's honesty about its intentions.

The same cannot be said for the others, especially Shell, though that's partly because the wounds are so fresh. "Shell built their whole network on independent businessmen who put everything they had in it," says Cleveland dealer Jeff Armbruster. He sums up his view of the company in a single word: "Dirtbag."

For those who lost it all, one word and a few sentence fragments is about all they can muster. "Betrayal," says Dan Self, a former Shell employee who locked the door to his St. Louis station after 23 years. "Anger. A lot of it is disbelief, that after all those buddy-buddy talks and all the effort I put into that place . . ."

On October 6, Dallas Texaco dealer Greg Kraft offered a little more via e-mail. "Just thought I'd let you know that they finally got me," Kraft wrote. "After 16 years I just closed the doors to my last station and walked away with nothing but the keys and a trip to my attorney's office to start bankruptcy proceedings.

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

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