Going, Going, Gone

Nobody was really surprised when Exxon Mobil Corp. announced in June that it was getting out of the domestic retail gasoline business by selling the 2,220 gasoline stations it owns in the United States. The move by the Texas-based oil giant follows similar moves by rival major oil companies that have been unloading low-profit retail gasoline businesses in recent years. For instance, BP PLC says it intends to have sold off all of its company-owned gasoline stations in the United States by 2009, and Conoco Phillips owns only a handful that it expects to sell this summer. Shell has already sold most of its direct retail sites.

Retail margins have been dropping since 1999, and the sale of company-owned and operated stations by Exxon, BP and other major oil companies provides hard evidence that the majors believe margins aren't going to rebound anytime soon. Exxon Mobil's strategy has been apparent for the last several years as it slowly shed its stations. Today it operates 27 percent fewer gasoline stations than it did in 2003.

Although gasoline is selling for more than $4 per gallon in most parts of the United States, making money in today's retail motor fuels environment is tough because the run-up in crude oil prices has outpaced the rise in prices at the pump. And the $100 or more it is costing many motorists to fill their vehicles' tanks have left consumers with less money to make discretionary purchases—such as drinks and snacks—at the convenience store. Store owners have long relied on those discretionary purchases to drive service station profits because retail gasoline margins have been razor-thin for as long as I can remember.

So it's the end of an era in petro- leum marketing. Gone are the 900- pound gorillas that dominated the retail side of the industry for decades. It's adios to the days of huge equipment orders, many direct from the manufacturer. It's sayonara to the long wait for the big checks, which seemed like they took forever to come but were always as good as gold. And it's good-bye to the legions of major oil company purchasing and field engineers, who rode the industry hard but improved the quality of the installations and the equipment PEI members made and sold.

The gasoline business is no longer dominated by global oil companies. Today, well-run convenience stores dominate the landscape in many parts of the United States. Retailers such as Costco, Wal-Mart, The Home Depot and grocery chains have been building gasoline retail stations in their expansive parking lots. Traditional petroleum marketers (oil jobbers), fewer in number but stronger financially, are important to us. And we can't forget about the single-store owners/operators who own 60 to 65 percent of the retail outlets in the United States. These groups make up our retail customer base, and each PEI member's ability to work with these different customer groups will be vital going forward.

Exxon spokesperson Premlata Nair characterized Exxon Mobil's decision this way: “It is just different business conditions. You have to adapt and move on.”

So on we go.

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The PEI Journal • Third Quarter 2008 • Volume 2, No. 3 • Contents are Copyright © Data Key Communications, Inc.
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