"We're kind of in limbo right now," George Barseghian, operations manager for Meetra Inc., which owns 12 Arco stations in Los Angeles County, told the newspaper. "We don't know who's going to take over, what our relationship will be with the newcomer and how it will affect our supply. We just don't know what's going to happen [image-nocss] and whether their policies will change."
BP announced recently that by the end of next year, it intends to sell the Carson refinery, and all of the ARCO stations in Southern California, Arizona and Nevada. "Aligned with changing trends in global demand, BP...intends to reposition its refining and marketing business in the U.S.," the company said. (Click here for previous CSP Daily News coverage.)
ARCO supplies about 25% of the gasoline purchased in Los Angeles.
Analysts cited by the paper put the number of stations involved at more than 400--most of them in Southern California and half of which are independently owned.
The independents rely on BP for their supply of fuel as well as the identity and promotion of their brand.
"The outcome will depend entirely on who BP sells ARCO to," Tim Hamilton, a petroleum industry consultant in Olympia, Wash., told the Business Journal. "If it sells it to someone fragile, then the franchises could have a bad experience. If the buyer, on the other hand, is better than BP, then their experience will be good."
Because of antitrust laws, Hamilton said, it is unlikely that the buyer will already be doing business in Southern California. "Chevron, for instance, probably can't buy it," he said. "The most likely scenario is that they will sell it to a company that no one recognizes here."
Jay McKeeman, vice president of government relations for the California Independent Oil Marketers Association, said that he fears a potential "market retreat" by whatever company that turns out to be. Under such a scenario, he said, ARCO's new owner would abandon independent stations. That would leave station operators to fend for themselves in the spot market, potentially destabilizing their retail price.
"That would be very problematic," McKeeman told the paper. "ARCO-branded stations would clearly be at risk."
Judy Dugan, research director of Consumer Watchdog, an advocacy group in Santa Monica, agreed. "The fact remains that ARCO has generally been the cheapest gas in most local markets, and I don't think that's likely to last," she told the paper. "Who would buy the company and say, 'Jeez, I guess I'll undercut my own brand by selling ARCO cheap'?"
Charles Langley, senior gasoline analyst for the Utility Consumer Action Network, a consumer advocacy group in San Diego, said that he believes there could be a ripple effect. "Arco has a tremendous amount of market power and is extremely competitive," he told the paper. "They are cost-cutters. If I were an ARCO dealer, I'd be very concerned."
Charlie Mulcahy, who's owned an ARCO station in Wilmington, Calif., for 30 years, said he is worried. He recently spent more than $30,000 on a point-of-sale (POS) payment system allowing customers to use ATM cards at the pump and is not happy about the element of uncertainty.
"In gas marketing we have a saying: either you make fast nickels or slow dimes," he told the Business Journal. "Arco is into fast nickels. If they decided to change their profile and all of a sudden we were high priced, I'd have to really scratch my head."
BP has said it expects to get at least $4.4 billion for the refineries and the stations--subject to approval by the Federal Trade Commission (FTC)--as part of a move to divest $30 billion in assets to cover costs associated with last year's oil spill in the Gulf of Mexico.
London-based BP, with U.S. headquarters in the Chicago area, markets more than 15 billion gallons of gasoline every year to U.S. consumers through more than 10,000 BP and ARCO retail outlets and supplies more than four billion gallons of fuel annually to fleets, industrial users, auto and truck manufacturers, railroads and utilities. BP is the single, global brand formed by the combination of the former British Petroleum, Amoco, Atlantic Richfield (ARCO) and Burmah Castrol.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.