Did Big Oil Fail Motorists in Northeast?

Regional chains fare better as Sandy-induced power outages expose supply-chain vulnerability

NEW YORK -- As lines of fuming motorists snaked along the highways of New York and New Jersey last week in search of gasoline, a surprising trend emerged: those who rushed to gas stations bearing the names of the world's biggest and best known oil companies were the least likely to find fuel, said Reuters.

Three days after Sandy pummeled the Northeast, fewer than one-quarter of the stations operating under the ExxonMobil, BP and Shell brands were selling gasoline, according to a Reuters analysis of industry data.

The companies say the figures are higher, closer to half.

Meanwhile, a handful of medium-sized regional chains like Hess, Wawa and Sunoco performed far better, with as many as three-quarters of their stations operating, using backup generators to dispense fuel to motorists, homeowners and utility crews, said the report. It came down to one critical factor: the outlets of the oil majors are franchised, while those of the regional chains are company-run and benefited from the full resources of their corporate parents.

It became clear that the power outages across the Northeast had exposed a vulnerability in the fuel supply chain that left as much as three-quarters of the New York City area's 4,000-plus stations unable to dispense fuel from electric pumps.

The Reuters analysis, based on data from retail intelligence firm OPIS, shows how hidden factors deepened the crisis.

Stations carrying the brands of the three big oil companies make up a third of the market in the New York City area, the data shows. Over the past decade, they have been franchised out to individual operators who receive little support from the majors whose name they bear.

When Sandy hit, they were largely left stranded, said the report, with no easy means to hire the generators needed to power fuel pumps. But at the regional chains, crisis teams swung into action, hiring dozens of units to get fuel flowing again.

"We have a detailed crisis plan, whether it be a big Nor'easter or a hurricane," John Poplawski, head of the emergency response team at regional convenience store and gasoline retailer Wawa, told the news agency.

As much as a week before Sandy arrived, centrally managed emergency teams at some gasoline retailers were preparing, scouring weather maps for signs of where and when the storm might land. Six days before Sandy struck, Wawa's Poplawski moved to secure 30 large-scale generators. They normally cost about $5,000 per week, but rental rates had already jumped 20%. He eventually took 15 units, from as far as Ohio, Indiana and the Carolinas. Then rates surged as Sandy struck.

"We had offers to get more than 15 at double the rate, but we chose not to," he said. "Frankly, the business benefit gets outweighed at that point."

"We were going down the list. As one generator became available we would [move it] to the next store," Poplawski said.

By Friday, four days after Sandy came ashore, 95 of its 100 New Jersey fuel stores had been reopened, the company said.

Hess was more aggressive, sourcing 85 generators before the storm hit, the company said. It had 177 of 186 of its stations in the area running again by November 2 because it was able to "execute hurricane preparedness plans across our retail network," the company said in a statement.

At hundreds of ExxonMobil's 500 stations in the region, a different story unfolded. ExxonMobil spun off the last of its retail division in 2008, licensing local operators to run their branded stores as franchises. Few stations had generators, and most relied on utility companies to restore power, according to Reuters interviews with Exxon and Mobil station operators in the area. Many struggled to make contact with their local representative as phone lines failed.

"Mobil helps no one," one Mobil station operator on Long Island, who asked not to be identified, told the news agency.

Only 46 branded Exxon or Mobil outlets in New Jersey were selling fuel on November 1, according to data from OPIS. On Monday, Exxon released a statement advising investors that it did "not own or operate any gas stations, fuel terminals or refineries in the impacted areas" of Sandy.

In response to queries about the data, an Exxon spokesperson told Reuters that half of its New Jersey stations had power by November 1. Some stores may have had power for the pumps but not credit-card sales, according to OPIS.

By this week, the problem had become more about distribution of fuel than about power, with more than one-fifth of the New York metropolitan area's stations unable to sell fuel because they were out of gasoline. It was not clear which brands were most affected.

"We are doing horrible," an owner of a Mobil station in Long Island, which has only received two rationed deliveries since the storm, told Reuters. "We don't have any gas, we have long lines at the pump, even though people know that we don't have any gas, hoping that we get a delivery," he said, asking not to be named.

An Exxon spokesperson told the news agency that it recommends that franchise owners have access to generators, "but we can't mandate it."

The OPIS data showed that only just over 20% of the 138 BP-branded stations in New Jersey were selling gasoline by November 1, a figure broadly similar across the region.

Asked about the figures, a BP spokesperson told Reuters that two-thirds of its 300 stations in the "New York-New Jersey metro area" were open by November 1, and BP had been helping emergency services get fuel "to the best of our ability." By November 6, BP had only 11 stations still offline in the area, he said.

Oil majors did help their branded stations to varying degrees. Shell shipped generators to be near its wholesalers before the storm, even though "this is not a part of our contractual agreements," a company spokesperson told Reuters.

Still, by November 1, more than half of Shell's branded stations in New Jersey remained closed, the company said.