Paying the Price

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

Industry groups argue that, with the entry of megaretailers as well as the expansion of convenience store chains, competition in gas retailing is stronger than ever. Much has been written about the reasons for high gas prices: OPEC production cuts, refinery fires and other supply disruptions, clean-air mandates, higher costs of doing business. And while those factors contribute to higher prices, they don't explain such curiosities as why Bay Area prices average at least 20 cents higher than in Los Angeles and San Diego, when documents produced in a Hawaii lawsuit show that the cost of doing business in all three cities is almost identical.

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. "How can you say that this is not a reduction in competition?" he asks.

"Look at their behavior," seconds Shelton, "and you can be sure their behavior is part of a plan."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 Schutzenhofer, who keeps in touch with many of the dealers he helped set up. "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 and for a while was willing to pay at least something for the value of the businesses. 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 Jeff Armbruster, a state senator from North Ridgeville, Ohio, who owns seven Shell stations in the Cleveland area. He sums up his view of the company in two words: dirt bag.

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