Paying the Price

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

Dimitris Karavokiris doesn't know how long he can hang on to the Shell station he leases on Sample Road in Coral Springs. When he bought the business from another dealer seven years ago, his monthly rent ranged from $3000 to $4000 after a sales-based rebate. When Shell eliminated the rebate program in 1998, his rent jumped to $6500. Last November Karavokiris was stunned to see his new rent figure: $20,000, rising to $25,000 per month in the third year of the deal. "I had to sign it," he says. "I had no choice. It was take it or leave it."

To make matters worse, Karavokiris has to deal with a competitor two miles away that consistently undercuts his price -- a company-run Shell gas station and convenience store with all the trimmings. "My biggest competition is Shell Oil," he says ruefully. "The day they built that station, I lost about 25 percent of my business."

Karavokiris, who also owns a smaller station in Fort Lauderdale, remembers better days. A Shell dealer for 20 years, he managed his businesses professionally and had excellent rapport with his company reps. His efforts earned him Shell's district Dealer of the Year award in 1987 as well as 30 other honors, and the company rewarded him with trips to Hawaii and Las Vegas. "Shell was the best in the industry," he says.

Though he's made offers to buy the property, sell his business to Shell or give it up in exchange for his smaller station, the company has not been in the mood to negotiate. Shell did offer him a pittance to abandon his Coral Springs location, but he turned it down. The future looks grim. "Eventually I'm gonna have to tell them to take the keys," he says.

At least Karavokiris is still in business. Former Shell dealer Juan Calvera gave up his station in Lake Worth in March after his rent more than tripled. His aging facility couldn't compete with nearby convenience stores, and though Shell had promised to rebuild it, paid for the plans, and pulled the permits, that never happened. He walked away from his $165,000 investment with nothing to show for his five years but heavy debts and a ruined marriage.

The neighborhood service station, once as much a part of the bedrock of a community 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 has 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 megaretailers such as Wal-Mart and Albertson's have entered the gas business, selling cheap to draw customers and to tighten the stranglehold on 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 capable of thriving in modern times, given the chance to compete. 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 Exxon, Mobil, 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 Angeles­area dealer George Mayer. "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. The easiest ways to extract the cash are by jacking rents and fees or simply taking over the stations.

But the implications are much broader. Independent dealers obstruct the ability of the major industry players to manipulate prices. And though industry leaders reject the notion that the companies have the power to push up prices, 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.

American Petroleum Institute spokeswoman Denise McCourt denies there is an effort to squeeze out the little guy. "All I ever hear [from the companies] is support for the dealer class of trade and how important the dealers are," she says. "The reality is that overall there is a strong commitment to the dealer network."

But a five-month New Times investigation has uncovered evidence to the contrary. A review of thousands of pages of internal company documents, court records, and legislative testimony as well as interviews with more than a dozen current and former company employees leads to an inescapable conclusion: Major oil companies have in fact been deliberately and systematically driving dealers out of business. New Times has obtained documents that expressly target dealers for removal, with specific reduction goals. Although dealers have protection under the law, the companies have found ways to circumvent it, including:• raising station rents 300 percent and more, instantly forcing dozens of dealers to close and shoving hundreds more to the brink;

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