BP Station Owners Face Long Road to Recovery


BP owns fewer than 2 percent of the 10,000 stations across the country that carry its brand, but that did not spare its independent station owners from boycotts, protests, vandalism and customer tirades about fouled beaches and oiled wildlife during the more than three months that crude flowed into the Gulf of Mexico.

Now, with efforts to plug the leaking well an apparent success and federal scientists suggesting that the remaining oil is dissipating rapidly in the gulf, these retailers and distributors are taking stock of the damage to their businesses and anxiously awaiting a plan by BP to rehabilitate a badly tarnished brand.

“You don’t have a problem like this and have it go away overnight,” said Tom Bower, whose company owns about 30 BP stations in Georgia and supplies BP brand gas to many more stations in the state. “It’s going to take a lot of work, but hopefully they’ll persevere.”

Sales remain down at BP stations nationwide, not just those in the Gulf Coast. The degrees of loss vary widely, with a few station owners still experiencing severe declines in business, and others feeling little or no effect. In general, the disruption appears to have topped out early in the crisis, with the persistent hit to sales lower than industry observers had expected.

Tom Kloza, chief oil analyst for the Oil Price Information Service, said sales for major BP distributors and retailers tumbled 10 to 30 percent early in the crisis, depending on store locations.

This has flattened out to an average decline of about 5 percent across the board — a significant drop, but hardly a fatal blow.

“It peaked in late June, in terms of the damage and the backlash,” Mr. Kloza said. “Most of the people are coming back.”

While the worst may be over for the BP brand, anxiety and dissatisfaction remain high among station owners and distributors. Some complain of a lack of public relations support from BP. The company introduced a lavish campaign describing its efforts to clean up the gulf, but spent little on ads explaining to the public that its station owners were independently owned businesses with only an inadvertent connection to the disaster.

“They’re on TV all the time advertising anyhow,” said Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association. “Why not put out an advertisement that explains that? I believe it’s something they could have done the first day.”

Scott Dean, a BP spokesman, said the company’s public relations efforts were primarily focused on providing signs and point-of-sale materials to station owners that identified them as local businesses, rather than on broadcast, radio or Internet ads.

“We would hope that customers wouldn’t take their frustrations out on station owners,” Mr. Dean said.

To blunt the impact of the spill, BP has also offered station owners and distributors small discounts on fuel and a break on credit card fees. Those hurt the most by the crisis appear to be small, family-owned stores where a combination of geography and the proximity of competing stations has driven large numbers of former patrons away.

Jayendra Patel owns a single BP-branded gas station and convenience store, the Umatilla Quick Stop, in Umatilla, Fla., about an hour north of Orlando. His sales have plunged nearly 50 percent in the wake of the oil spill and have yet to recover.

“They’ve gone somewhere else. I can do nothing,” Mr. Patel said. “We put signs out saying we are part of the community, that we have nothing to do directly with BP. It still doesn’t help.”

The drop in gasoline sales did not hurt his profits directly, but badly eroded traffic into his convenience store, where he makes virtually all his profits. He has dropped prices, even on cigarettes and beer, but to no avail.

“We make nothing on the gasoline, but it brings in the people,” he said.

Station owners suffering spill-related losses have few options for immediate relief. BP has invited them to submit claims for their losses, but they must join a long line of others seeking payouts, among them fishermen, restaurateurs and hotel owners. And as most station owners’ profits come from in-store purchases, rather than gasoline sales, it remains unclear how compensation will be calculated.

Switching brands is also an untenable option. To fly the BP flag, store owners must sign contracts that average 15 to 20 years and that contain severe penalties for changing brands prematurely.

Even after oil companies sell properties to independent operators, these contracts ensure that the companies maintain a steady flow of revenue — typically 2 to 3 cents a gallon, but sometimes much more, said Bob Bassman, a lawyer who represents the Petroleum Marketers Association of America and the BP Amoco Marketers Association.

BP’s revenue from gasoline sales is meager in contrast to the tens of billions of dollars it earns from oil exploration and production. Yet it is typically enough to offset the company’s extensive marketing efforts, and return a profit, Mr. Bassman said.

According to BP’s latest annual report, it sold about 150 million gallons of refined products to service stations, wholesalers and other customers each day of 2009, much of it in the United States.

“It’s a lot of gallons and a lot of money,” Mr. Bassman said.

Keeping this revenue is one incentive for BP to rehabilitate its retail brand in the aftermath of the gulf disaster, but the company has other reasons. BP is the biggest oil producer in the United States and has its largest refining presence here. As legislators and regulators weigh penalties for BP, including a possible ban on further offshore exploration, a major effort to bolster the company’s retail brand could help repair its public image over all.

The retail brand “is their image to the American public,” Mr. Bassman said. “They care about it tremendously.”

Some retailers and distributors have called on BP to convert its stations back to the popular Amoco brand, which it displaced after a takeover in 1998, but company representatives said such a move was not in the works. “We have no intention to switch brands,” said Scott Dean, a spokesman. “The BP brand is here to stay.”

Independent analysts also called the prospect of a switch back to Amoco — which would most likely cost BP billions while adding little to its bottom line — improbable. “I think that was a flight of fancy,” said Mr. Kloza, the oil analyst.

With the BP brand apparently here to stay, the company’s retail and wholesale partners say they are eager to see a comprehensive image rehabilitation strategy from BP. So far, they have heard few specifics.

“A penny or two off per gallon or some reduced credit card fees — that’s not addressing the long-term picture. That’s addressing today,” said Mr. Smith, who represents Florida’s marketers.

“I’m not sure BP knows what to do yet,” he added. “I’d like to think they’re working on it.”

Add comment

Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
Cooper Law Firm

Follow Us

© Stuart H Smith, LLC
Share This