Paying the Price

A dozen years ago, Dale Ervin saw his partnership with Amoco as permanent. The dealer leased four Amoco service stations around Denver and had racked up an office full of company performance awards; his Colorado Boulevard station was one of only two in the state to sell more than three million gallons in a year. "Back then, it seemed like they wanted the dealers," Ervin recalls.

But in the late 1980s, Amoco doubled station rents and tacked on hefty monthly charges for repair bays that ate away Ervin's profits. Amoco's own company-operated stores sold gas at only a penny or two above his cost, further reddening his bottom line. Sixteen dealers, including Ervin, sued the company for predatory practices and won a $2.5 million jury verdict in 1991, eventually settling for less five years later -- after Amoco promised to appeal into the next century. Two of the dealers died during the litigation.

Ervin hoped his fortune might improve after that, but Amoco's attitude seemed to harden. In 1997 he sold his last station back to the company. "They finally got the rents so high, I just couldn't afford to operate them anymore," he says.

Ervin wasn't the last Amoco dealer in the Denver area. Clay Murrant still operates his station on Broadway in Englewood, one block south of the Denver city limits. But Murrant just got word that Amoco will "surplus" his station in fifteen months, and if he can't scrape together the half-million bucks or more needed to buy the property, he'll be out of business. "They're just gonna toss me aside," Murrant says.

If Amoco has been the most active in eliminating dealers from Denver, it's only because other gas retailers in town either never had dealers or finished the job long ago. Attorney Hubert Safran knew of more than a hundred Texaco dealers statewide when he worked a pricing case in the late 1970s on behalf of some gas wholesalers. "A few years ago," Safran says, "there were six Texaco dealers left in the state of Colorado."

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 from 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 Albertson's 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, 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 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 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."

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 has occasionally reported the charges, along with 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."

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Bob Burtman