BP Dealers Are Not The Right Target

June 17, 2010

If you’re a BP gasoline dealer you have to be nervous. The impact across the country, as evidenced by widespread reports is mixed. Some retail dealers say that the consumer’s wrath has yet to descend upon their driveways regardless of the social media effort to mobilize a boycott of the British company. At other stations it’s a different story.

“People are kind of melting away," is how Jay Ricker explained to the Wall Street Journal the  5.4 percent drop of same-store sales he suffered last week at his 35 BP stations. He is the chairman of Ricker Oil in Indiana. A BP dealer told the Daily Herald that his seven stations in suburban Chicago have experienced a 30 percent drop in sales, which could threaten the viability of his company and the 90 jobs it provides.

There are a number reasons why the effort to punish BP through its dealers is misguided. There are very few stations that are owned and operated by the refiners. In the industry these are called company-ops and few of them exist. In these locations the cashiers and the attendants would be employees of BP and the performance of these stores would directly affect the bottom line of oil giant. Some states have laws on the books that prevent the refiners from directly controlling their product from the well to the pump. If you can confirm that a certain station is a company-op, you will have maximum impact.

As a service station dealer, I can say that the relationship the franchisee has to the parent company whose brand he represents is not a very strong one. Most stations are not supplied directly from the oil company, but receive their product from distributors. It's not unusual for these jobbers, as they are called, to change their affiliation depending on what oil company has the most aggressive incentives or pricing structures. When this happens the individual dealers would move with the jobber from brand Y to brand Z. So you can see that his allegiance is hardly set in stone.

Next consider the supply stream. Refined gasoline is a commodity that is moved around the country through the pipeline and dragged around in tank wagons. The product arrives at different terminals and from there finds its final destination as the market dictates. So if BP has a refinery in the area it probably is BP gas at your neighborhood station. If however they don’t, it’s probably another brand you’re burning, which was acquired under some reciprocating agreement with another oil company who sells BP’s gas where they have no refinery.

The point is that when you avoid a BP station, there’s only an assurance that you are punishing the independent business owner of the outlet not BP. What’s even worse, when you choose to buy elsewhere you may still be buying gas that has been supplied by BP.

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