Paying the Price

Major gas companies are driving away independent station operators, all in the name of greed

First of a series
(see Part II: "Pumped Dry," November 2)

Gus Taxiarchou built a thriving business at his Exxon station on Aldine Bender at I-45. The prototypical service station dealer, Taxiarchou worked long hours waiting on customers and managing the repair shop. He increased gas sales to a high of 196,000 gallons in a month, almost twice the average before he took over in 1986. He won more than a dozen performance awards for his efforts and took company-backed trips to Las Vegas and Disneyland. Life was good, and Taxiarchou appreciated it. "I had Exxon blood,"he says. "I loved Exxon."

But in January 1997 Exxon opened a mammoth new company-run station one mile away from Taxiarchou at the West Road exit, complete with convenience store, free car wash with fill-up, and fast-food outlet. The station priced its gas near Taxiarchou's cost, squeezing his profit margin and taking his customers. Nor could he compete effectively with the company-operated Shell station across the street, which consistently sold gas for less than he paid. His rents and other expenses increased, and though he repeatedly asked Exxon for help, the response was always the same: Sorry.

Service station dealer Gus Taxiarchou in front of his former business, padlocked by Exxon.
Service station dealer Gus Taxiarchou in front of his former business, padlocked by Exxon.
Former Houston Shell dealer A.V. Meghani lost 21 stations and owes creditors $4 million.
Deron Neblett
Former Houston Shell dealer A.V. Meghani lost 21 stations and owes creditors $4 million.

Taxiarchou borrowed money from his parents and credit cards to keep his business afloat, but the high prices caused sales to drop, and financial ruin loomed. When Exxon offered to buy him out, he accepted, though the deal barely covered his debts. In the end, he had nothing to show for his 14 years with the company. "You thought you were something special,"he says. "But when it boils down, you're nothing."

Taxiarchou was one of the lucky ones. A year ago Luke Stellakis turned in the keys to his leased Exxon station at West Bellfort and Chimney Rock shortly after company officials told him the location was no longer viable and his lease would not be renewed. Previously, Stellakis says, Exxon thwarted his several attempts to sell the station to someone else, nickel-and-dimed him to death with fees, neglected required maintenance and undercut his price at nearby company-operated stations. He lost his $100,000 investment and today must work two jobs to support his family. Now ExxonMobil, the company still sends him bills for $4,300 it claims he owes in back rent.

Former Shell dealer A.V. Meghani owes a lot more. Beginning in 1986 Meghani built a mini-empire by buying or taking over poorly performing stations and revamping them. By 1999 he had invested more than $10 million, was leasing 21 Shell stations and boasted a wall full of plaques, including three prestigious Circle of Success awards. That September, Meghani was handed a new set of leases -- even though 18 of his agreements had not yet expired -- and was asked to sign them by October 31. The leases almost doubled his total rent and contained provisions that constricted his ability to operate effectively. Three months later he was out of business.

Meghani still owes creditors more than $4 million. "They've left me no choice but to declare bankruptcy,"he says. "Shell has ruined my life."

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, mega-retailers such as Wal-Mart and Albertson's 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 by 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 one-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."

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