Pay at the Pump

After 20 years at his Amoco station on State Line Road at I-435, Robert George has a lonely feeling. When he first leased the business, Kansas City had a thriving service station network and an active dealer organization. Amoco supported its dealers as well as any oil company, and the money was good. But in the mid-1980s, Amoco's attitude toward its dealers seemed to change. First the company began running its own convenience stores that undercut the dealers on price. At the same time, Amoco allowed its leased stations to deteriorate, making it difficult for them to compete. "They haven't spent any capital in this market in 15 years," George says.

When QuikTrip moved into the city and began pricing aggressively, Amoco didn't seem especially concerned that dealers were losing sales. Instead, the company started increasing rents and taking away the concessions that had helped the dealers stay profitable. Just this month Amoco eliminated its "meter marketing plan," which allowed dealers to pay for gas as they sold it; now they pay for each load on delivery. George, who owns a second station at 107th and Roe, says the change has constricted his ability to operate. "They're taking about $25,000 to $30,000 cash flow out of each of my businesses," he says. "They know my numbers. What they're doing to help me out at this time is absolutely nothing."

At least he's still in business. George has watched dealer after dealer close down, and not just those flying the Amoco flag; Texaco, Phillips, and Conoco have converted almost their entire Kansas City networks to company-run operations. And the clock is ticking for the few who remain. George says that if a QuikTrip is built across the street from his State Line shop as rumored, he won't be able to stay alive. "If they build it," he says, "I'm outta there."

"At this point, we're like dinosaurs," George says of the dealer breed. "We just haven't figured out we're dead yet."

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 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 way to extract the cash is to jack up rents and fees or simply take over the stations and run 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 1-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."

Dealers, the bulk of whom traditionally leased their stations from the oil companies in franchise arrangements, have been complaining of predatory practices for years. The media have occasionally reported the charges -- as well as the stock company denials. "All I ever hear (from the companies) is support for the dealer class of trade and how important the dealers are," says American Petroleum Institute spokeswoman Denise McCourt. "The reality is that overall there is a strong commitment to the dealer network."

But a five-month investigation by Pitch Weekly's sister paper the Houston Press 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 lead to an inescapable conclusion: Major oil companies have in fact been deliberately and systematically driving dealers out of business -- in several cases, documents reveal, they expressly targeted dealers for removal, with specific reduction goals. Although dealers have protection under the law, the companies have found ways to circumvent it, including: