HOUSTON -- We're going to have to find another brand, said a somewhat stunned Chris Postlewaite upon learning that CITGO was discontinuing supply in his market. Postlewaite, general manager of retail operations for Owensboro, Ky.-based Valor LLC, said he would have to seek a new brand for all 12 of his CITGO locations.
Postlewaite was among a number of operators commenting on CITGO's major realignment plans as reported in Wednesday's CSP Daily News.
In short, the Venezuela-owned CITGO Petroleum Corp., with headquarters in Houston, [image-nocss] will realign its U.S. retail gasoline network footprint. Over the next year, CITGO will halt distribution in 10 states and discontinue supply some stations in four additional states, company spokesperson Fernando Garay told the Associated Press.
CITGO's shift toward the East and Gulf Coast regions will result in the debranding of 1,800 U.S. stations, including Postlewaite's Valor stations. We really don't know how soon it's effective, he said. The only information I've gotten so far is what I got from CSP this morning. We already had a feeling that it was going to happen; it was kind of in the rumor mill, murmured in back hallways for a while, said Postlewaite. Valor operates 86 dealer locations and 32 Jumpin' Jacks retail sites.
Valor was hardly the only retailer lamenting CITGO's decision. David Wright, owner and operator of West Liberty CITGO in West Liberty, Ky., told CSP Daily News he will be forced to go brand hunting. I talked to my distributor, and it looks like my only option now is unbranded, Wright says. I could have gone maybe with [one other major brand], but they're wanting millions of gallons and I don't have a big enough store. Either that, or we're too close to everybody else in town.
He added, I think [CITGO] pretty much announced they'd be cutting back, and there might've been some inside sources to distributors, but today's [announcement] was news. It's a little spooky, and now we're left trying to get everyone to understand that our new brand, whatever it might be, is going to be just as good as the old one. [Going unbranded] might give me an edge in pricing, but it's getting tougher and tougher, and now we're losing the CITGO credit card. To me it's like starting all over again. I might get a few more cents per gallon, so I'll stay positive and put faith in [my distributor].
There's going be a lot of people in the same boat as I am, Wright said.
Garay defended CITGO's decision, saying it is shedding a lackluster segment of its business, while strengthening core positions. He acknowledges the realignment could create some logistical headaches for gasoline retailers in the short term, but emphasized the move should not have any impact on the nation's overall fuel supply.
CITGO, the reputation of which among petroleum marketers has slumped in recent years due to anti-American rhetoric from Venezuelan President Hugo Chavez, said it has been purchasing 130,000 barrels per day (bpd) from third parties to meet its service contracts at 13,100 stations across the United States, a less profitable practice than selling gasoline directly from its refineries. CITGO operates three U.S. refineriesin Lake Charles, La., Corpus Christi, Texas, and Lemont, Ill., yielding 750,000 bpd.
As for CITGO's divestitures, it said it will stop selling fuel at the following states: Iowa, Kansas, Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma and South Dakota. A limited number of stations in Illinois, Texas, Arkansas and Iowa will also be affected.
Venezuela is the world's fifth-largest oil exporter and the United States is its top buyer. The United States relied on Venezuela for about 11% of its oil supply in 2005.
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