Paying the Price

Bud Faron and other independent dealers devoted their lives to the big oil companies. That just wasn't enough.

Bud Faron can't remember life without Shell. His leased family service station at North Lindbergh Boulevard and Ladue Road began flying the Shell flag almost 60 years ago. One of the first stations in St. Louis County to pump more than a million gallons in a year, the location consistently performed as well as any in town. When another dealer offered to buy the station for $200,000 in the early 1990s, Faron politely turned him down. After all, his son was primed to take over when he retired, as Faron had from his father, and he wasn't about to sell the family business.

But about two years ago, Shell socked Faron with a double whammy. His cost of gas began to rise above that of his competition, and to keep pace he had to decrease his profit margin. At about the same time, the company eliminated its rent-rebate program. By this January, his monthly payment had soared to $9,300, almost double what he'd paid before. "You have to accept changes, which we did," Faron says. "But when changes come at you at $4,000 a crack, that's just crazy."

Other dealers were feeling the pinch as well. Faron watched helplessly as his counterparts around the city, including his cousin, turned in their keys. He asked Shell representatives for an explanation, but none was forthcoming, and the company refused to negotiate. "It was as cold and harsh as anything I've ever seen," he says.

Bud Faron's Shell station
Jennifer Silverberg
Bud Faron's Shell station

Faron tried to hang on, but after three months he realized the futility. In March, he and his son locked the doors. "I almost felt like I wasted my life," he says. "We were one of many thousands that built that corporation, and they just moved us out."

Like Faron, Dan Self got moved out of the Shell station he leased for 23 years on North Tucker Boulevard at Convention Plaza. An operator who won numerous performance and image awards, Self served as president of the St. Louis Shell dealers' council for 12 years until 1998, when the council disbanded after its membership ranks were decimated. When the rent and price increases hit, his sales plummeted by half, and he shut down last November. The stress of losing his business took its toll on his personal life, and he started having marital problems that haven't gone away. "Let's just say we talk seldom," Self says. "It's like we're roommates now."

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 with disuse. Convenience-store chains added pumps in the 1970s and '80s and captured a huge share of the market. Recently, megaretailers such as Wal-Mart 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, ExxonMobil, 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 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 the companies have the power to push up prices at will, the motivation is certainly there: In the United States, a 1-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 have traditionally leased their stations from the oil companies in franchise arrangements, have been complaining of predatory practices for years. The media have occasionally reported the charges -- as well as 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 Denise McCourt, a spokewoman for the American Petroleum Institute. "The reality is that overall there is a strong commitment to the dealer network."

Next Page »