2007/05/09

Failing at Business, Lesson 5 - Summer Gas Prices Edition

Summer is here, and up, Up, UP go the gas prices. Though for some gas stations, the normal summertime hike is just the beginning. But you gotta wonder about a business that simply seems uninterested in selling gasoline.

On the left...On the right...

70 cents per gallon less--and right across the street?! So sure, maybe Shell is desperate to hold on to a prime location, and maybe they're paying a fortune in rent, but you'd think that they'd want to offset the cost with SOME sales.

18 Comments:

Looks like the Shell CEO wants a bigger bonus. Eeeeeek!
God, I'm glad I live in the "City too busy to Hate," ATL. Price is $2.92 on average and I'm still pissed.
glad i use vegetable oil for fuel... well, not really, but that biodiesel concept is soo cool.

http://www.dancingrabbit.org/biodiesel/
Peacechick... It's going to take a long time at $.70/gallon. First, that station sells no gas. Second, it's the only station with prices that out of whack.

Dave... $2.92. What? Are they refining the gas on the premises?! ;-)

Raffi... I use caffeine. But then...I don't own a car. All leg power!
The really sad thing is it's all coming from the same refinery across the Bay. What do you think they're doing to the Shell gas, gold plating it?
My gawd, what utter bullshit we are witnessing. It is so transparent and blatant that even our Oregon GOP Senator Gordon Smith is co-sponsoring legislation to actually make gas-price gouging illegal. Imagine that! A Republican (and a Democrat) standing up to the oil industry and the auto industry? What is America coming to, and why do some politicians hate America so much!? ARRRRRRGHHHHHHHH
$4.00 dollars a gallon is not far down the road. Look for it too hit $4.50 or even $5.00 by next Thanksgiving.

Maybe a few Oil Company CEO's should have too look over their shoulders, than maybe the price would start too come down some?

Also wait until the Iraqi's tell Der Fuehrer Bush to get the Hell out of Iraq. Then the price of Oil will skyrocket up over $100 Dollars a barrel.

God Bless.
Oh man Kvatch!

And I was bitching about $3.20/gal.

I'm glad you pointed me to this. At least we can share a holiday in our own misery.

In all seriousness, I feel for you guys out there- wish I could ship you some of this "cheap stuff".

With this and the housing market going bizarre...
Fashiongirl... Perhaps people will think that the higher priced gas is more desirable. "This is the real deal, not like that 'knockoff' gas from across the street'.

Snave... Turns out that the Chronicle ran a story today (a day later mind you) about that very station. It's a franchise owner that is pissed off at Shell and trying to make them look bad.
Anon-Paranoid... I think you're right about $4.50 before the end of the summer, but then prices will come down a bit. It's in Big Oil's interest not to make themselves look like the gougers they are during the heating season. Congress is much more likely to investigate over gouging in heating oil.

Chuck... Actually, don't worry about me. Remember, no car in this family! When I need a car, I rent one. But generally I save so much by not owning one that I could pay $10/gallon and it wouldn't matter.
kvatch,

There was obviously something fishy about the story of the Shell game. That's why I didn't comment.

The following article gets to the heart of the matter:

Dealer prices gas over $4 in protest

He says tactics used by Shell are unfair to operators
C.W. Nevius

Thursday, May 10, 2007

It has become almost a regular stop for San Francisco tourists. Once they've seen the Golden Gate Bridge and the Transamerica Pyramid, they can drive down Harrison Street to see the most amazing sight of all.

Regular gas for $4 a gallon.

Actually, it is higher than that. At Bob Oyster's Shell station at Sixth and Harrison, regular is $4.33 a gallon, plus is $4.43, and "V-Power'' is $4.53. Motorists can be seen rolling their eyes as they drive by. Just another example of a greedy station owner, sticking his customers for all they are worth?

Not really.

There's a much deeper story here, and it begins with Oyster, a respected, self-made businessman who turned a single station into Oyster Petroleum, a profitable firm in Redwood City. Oyster is nobody's fool. Don't think he isn't well aware that the Chevron station across the street is selling regular for 70 cents less.

Putting the price way up over $4 a gallon isn't about making a profit. It's about making a statement to a multinational corporation. After Shell forced him to pay higher prices for gas in San Francisco and jacked up his rent, Oyster says, he decided to fight back.

"I got fed up,'' Oyster admits. "It makes a statement, and I guess when people see that price they also see the Shell sign right next to it.''

In fact, far from making a huge profit, Oyster is going out of business. He has operated the Shell station at Sixth and Harrison for 22 years, but he's walking away from it at the end of the month, handing over the keys to Shell officials and expecting them to shut it down.

"I'm getting nothing for the station,'' he says. "I just give them the keys and walk away. They told me they were probably just going to fence it and bulldoze it anyway.''

For franchise dealers like Oyster, it is the ultimate irony. At a time when the oil companies are posting record profits, the little guys are struggling to stay in business. And many, like Oyster, are giving up the fight.

"The dealer can no longer be competitive,'' says Dennis DeCota, executive director of the California Service Station and Automotive Repair Association. "The companies are squeezing these guys out. Bob's tired of it, and a lot of us are. It's just wrong.''

Shell, of course, says nothing could be further from the truth. "I can only speak for Shell, but the majority of our sites are independently owned,'' says company spokeswoman Karyn Leonardi-Cattolica. In fact, she says, the number of independents is increasing.

Maybe so, but anyone entering the business had better be prepared. Oyster says his rent has gone up exponentially. Fifteen years ago it was $1,000 a month. Then it went to $6,000, then $8,000, and five years ago the company wanted $13,000. Oyster says he was able to appeal that amount, based on real estate values, and "we got it down to $6,000,'' but this year Shell came back with a demand of $13,000 again.

Leonardi-Cattolica did not get back to us Wednesday about Oyster's station, but when asked in the past about similar rent increases, she said, "To the extent that rents went up, it was to bring them in line with the rest of the market.''

DeCota and Oyster see a more sinister motive: If the dealers like them leave, a company like Shell can run its stations with its own employees and set its own pump prices.

"That way they really are controlling it from the well head to the gas pump,'' says DeCota. "Once the gas companies get control, you are going to pay the price.''

It isn't just the rents that put the squeeze on the independents. Oyster has other stations in the Bay Area where he can buy gas for up to 20 cents a gallon less than what he has to pay Shell for gas in San Francisco.

"We've said, 'Just let me buy my gas where I want to,' '' Oyster says. "They won't let me do that. I want to say, 'You guys make enough off of me. 'Why don't you give me a little break?' They don't care. Shell would rather put us out of business.''

That's a job that has been pretty well accomplished. Despite a location that is just off the entrance ramp to Highway 101, Oyster's station isn't getting much traffic. Part of that is the price, of course.

I stood on the curb for a full 20 minutes Wednesday afternoon before the station had a single customer. And that was motorcyclist Ken McNary, who said he stops by only because he thinks his Yamaha needs "V-Power'' gas. But when I asked him if he'd noticed that the Chevron had much lower prices, Oyster's station lost another customer.

"Well, I'm going across the street from now on,'' he said. "The last time we filled up our van here it cost $120.''

While the price per gallon gets all the attention, Oyster says the little secret of independent dealers is that, like movie theater operators, they make their profit on the extras -- snacks, drinks and other items. But with the automated pumps and a small lot, he's limited to three gas pumps and a tiny cashier kiosk.

"All I've got is gas and cigarettes,'' he says. "And you can't sell that many cigarettes.''

So Oyster took matters to their logical conclusion. If it took $4 gas to get people's attention, he'd give them $4 gas.

"I'm going out with a bang,'' says Oyster. "And I don't care if I don't pump a gallon on the last day.''
no_slappz... What the SF Chronicle article doesn't tell you is that they operator hasn't been doing this for just a couple of weeks or a month. He's been doing this for more than three years. That Shell station's prices have been about 20% higher than the Chevron across the street for as long as I can remember.
Prices will go up to around $5 or so per gallon up to about.. oh... September 08.

Then they will "mysteriously" drop back down to around 2.50/gallon in October.

Thus Predicteth da mouse...
kvatch, you wrote:

"What the SF Chronicle article doesn't tell you is that they operator hasn't been doing this for just a couple of weeks or a month. He's been doing this for more than three years."

Is three years your estimate, or is it a fact?

You wrote:

"That Shell station's prices have been about 20% higher than the Chevron across the street for as long as I can remember."

So what! If people willingly pay more for a product that is available for less across the street, that's their loony right. It's also the right of the operator to ask any price for his product. As you know, it is a law that gas stations display their prices on signs visible to drivers.

Is there anyone who still believes that gasoline from one station is better or different from gasoline at another? Like dollar bills, gasoline is uniform, fungible.

Near me in Brooklyn are two gas stations. One Exxon. One Mobil. They are across the street from each other. In fact, they are both on the same side of a major street in Brooklyn, separated by a side-street running perpendicular to the main road.

Though Exxon and Mobil are the same company these days, the two stations always charge different prices. The differential is rarely more than a dime a gallon. But it is amusing that there is any difference. The Exxon station is always the higher priced stop. But its convenience store is far better than the Mobil store.
First, why doesn't No_slappz get his own blog?

Second, here is a really expenisve Shell station.
So what! If people willingly pay more for a product that is available for less across the street, that's their loony right.

So what indeed. People don't buy this station's gas, willingly or not. It is empty at all times of the day and night despite it's position at the foot of a I280 off-ramp. So the real question is, what's the point of a needlessly combative, off-topic comment like your's? Other than the fact that it's your calling card.

And BTW, the three years he's been doing this (more actually) is not an estimate. I drove that route in and out of SF from early 2002 through the fall of 2005. His prices were 20% higher then; He had no business then; Nothing had changed when I stopped driving; And nothing has changed since.
Sewmouse... I agree that prices will sink in the fall. Heat is more politically sensitive the ability to drive.

First, why doesn't No_slappz get his own blog?

Diva... no_slappz knows exactly what he (she?) is doing.

When he starts posting his essays my traffic doesn't drop, but commenting usually goes right into the dumper. He's not a regular Blognonymous reader--has no interest in most of the posts. Mostly he does his best to impugn my intelligence and then spends the rest of his time writing out his own particular point of view, at length and frequently off-topic.

In short, no_slappz is 'a cooler'.
kvatch, you wrote:

"But you gotta wonder about a business that simply seems uninterested in selling gasoline....maybe Shell is desperate to hold on to a prime location, and maybe they're paying a fortune in rent, but you'd think that they'd want to offset the cost with SOME sales."

You also asked:

"So the real question is, what's the point of a needlessly combative, off-topic comment like your's?"

Your initial question about the Shell station was not a question. Instead, it was an attack on gas companies, Shell specifically, and gas prices. You assumed Shell was paying rent to a landowner. In fact, the station operator is paying rent to Shell. That's the usual practice with gas stations.

Thus, the real question is why the owner of the station chose to engage in some bizarre battle with Shell.

His moral point is obvious. But that doesn't mean much if he fails to pay the monthly rent.

Why don't you do a follow-up on this piece of property in a few months. If Shell converts it to a company facility, the change will occur immediately. If the property has more value to a different owner, a sale will occur soon enough.

Maybe Bob Oyster intends to buy the land from Shell and construct a building. Who knows.

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