Proposed U.S. law would bar oil companies from owning stations.

Proposed U.S. law would bar oil companies from owning stations

Los Angeles County's major oil companies and service station dealers are on opposite sides of the tank regarding a bill recently introduced in the U.S. Senate that would outlaw refiner-operated gasoline stations.

Dubbed the Motor Fuel Consumer Protection Act of 1991, the bill was introduced April 9 by Sens. Dennis DeConcini (D-Ariz.), Howard Metzenbaum (D-Ohio) and Strom Thurmond (R-S.C.). It states that "it shall be unlawful for any producer or refiner to operate any motor fuel service station in the United States." The bill has not yet reached the Senate floor, but is currently in the Senate Judiciary Antitrust Subcommittee.

Downtown Los Angeles-based Atlantic Richfield Co. has 352 company-operated stations, while downtown Los Angeles-based Unocal Corp. has only two. Both companies oppose the bill.

Stuart McDonald, vice president of distribution for Arco, said legislation of this nature has been introduced before but has never reached the Senate floor. "Hopefully this one won't either because it is anti-consumer and anti-competitive," he said. "We think that this bill is so bad that hopefully congressional leaders will see that and not pass it."

But gasoline dealers see things differently. "It sounds like the momentum toward divorcement is really increasing," said Chuck Throop, a Unocal dealer in Fullerton. "I've had dealers calling from other states wanting to know more about it."

McDonald argued the bill, if it passes, "has the potential to put a lot of people out of work" -- specifically, the employees at company-run stations.

In addition, prices go up at the pump in states where divorcement is law, he said. A study conducted in one such state, Maryland, showed that gasoline prices went up considerably after divorcement went into effect, McDonald said.

One dealer, however, says permitting producers or refiners to operate stations would ultimately produce just the opposite effect. These stations often have lower prices than do dealer-operated stations because companies sell gasoline to dealers at a higher price than to stations they themselves operate, said Mike Noble, a Texaco and Unocal dealer in Orange County. "They're buying their own product," he explained.

These lower-priced company stations are slowly driving dealer-operated stations and independents out of business, Noble said. Then, after they eliminate the competition, the major oil companies will be able to raise pump prices, he said.

Noble explained why gasoline is cheaper at refiner-run stations, using his own situation as an example. He pays $10,600 a month to rent a Texaco station in Anaheim Hills, pays a "set price" for gas and pays a Texaco credit card fee, he said. Nearby is a company-operated Texaco station selling gasoline for the same price but located in a nicer and newer building.

The gasoline price at the company-operated station in "no way" substantiates the rent Texaco is paying on that building, Noble said. Instead, he said he believes Texaco is using the $10,600 that he pays for rent and the rent of other dealers to subsidize company-operated stations.

Taking a look at the other side, McDonald enumerated reasons against the divorcement bill in a published report:

"Divorcement is not a solution to dealers' problems. Their problems are deeply rooted in the economics of retail gasoline marketing which divorcement won't change," McDonald wrote. "Divorcement will raise gasoline prices and limit consumer choices by eliminating one whole class of competitors."

Unocal spokesmen had no official statement regarding the bill.

In addition to banning refiner-run stations, the bill would bar refiners from requiring gasoline dealers to purchase more than 70 percent of a station's fuel supply from a particular refiner.

Also, under the proposal, dealers could decide not to offer all of their oil companies' gasolines, he said. But Throop said both dealers and consumers can save money if dealers have the option of buying gasoline from more than one supplier.