Exxon Joins Competitors in Moving Away from Gas Station Ownership

By Mike Caggeso

High gas prices have forced Exxon Mobil Corp. (XOM) - the world’s largest oil company - from the retail gasoline business, the company said late Thursday afternoon.

There are about 12,000 gas stations with the Exxon sign at the entrance, though the company owns about 2,220 of them. And Exxon plans to sell those over the next few years, Reuters reported.

Texas leads the states with the most company-owned gas stations with 190. Florida has 170, the Associated Press reported.

“We are in a very, very challenging market. Margins are reduced,” Exxon spokeswoman Prem Nair said in a statement. “We feel the best way for us to grow and compete is through our distributor network.”

Exxon stations may be everywhere but retail gasoline sales are only a small portion of the company’s revenues. And with gasoline costing 31% more than a year ago and crude oil prices at record levels, it’s also one of the most unprofitable.

This doesn’t mean we’ll stop seeing the ubiquitous blue signage across the country. Exxon will continue selling fuel to station owners who pay to use the company’s brand name.

Oppenheimer & Co. analyst Fadel Gheit estimated the stations’ profit margin was between 10% and 15% (the company doesn’t release margins for its retail division), which is about one-third of its margin for crude oil production.

“I think the decision came that it’s more of a headache than it’s worth,” Gheit said.

Gas stations can’t pass higher prices onto consumers as easily as oil companies pass prices onto them. On top of that, car owners nationwide are taking serious steps to curb gasoline and energy usage, doing everything from using other forms of transportation to buying more fuel-efficient vehicles such as hybrids.

Exxon’s decision follows that of competitors Royal Dutch Shell PLC (RDS.A) and BP PLC (BP), who are also moving away from station ownership.

“They can actually point their attention to some other area where you can make money,” Jeff Lenard, a spokesman for the National Association of Convenience Stores, told the AP. “Retail is incredibly volatile. This way, they can (sell gasoline) wholesale and count on a fairly predictable income.”

Comments

[jdspain:]

its interesting ceo gets called up in front congress committee and blamed for all the gasoline problems and comes back and releases news we are pulling out of retail gasoline business. No more harrassment from big govenment, neighbors who blame oil companies, boycotts that are stupid, and of course the web message boards on cospiracies. Gone will be the good jobs these corporations held, the great benefits and the ability to react to emergencies during hurricane preparations, cold snaps, etc.
I doubt distributors will pay their employees the same pay packages as big oil. I foresee big oil next pulling out of wholesale distribution , selling of terminal, pipelines, barges, and refineries.

2008 Jun 16 08:12 AM

[Mmarrkk:]

Thanks "Big Congress". Your harrassment of "Big Oil" will lead to many other things. What it won't lead to is more investment in domestic oil and gas production. Windfall profits tax? Spend more money overseas. Keep it up? maybe a move of corporate divisions out of country??? Who knows. But singling out 5 companies in one industry with the tax code is ludicrous.

2008 Jun 16 08:42 AM

[long_on_oil:]

You can bet your last dollar that now that oil companies are pulling out of retail gas that the remaining stations will control the retail price of gas and the only direction is up. If retail stations are to make a profit and remain in business they will have to have the margins. BP, Exon etc, sacrificed margins at the retail level to keep prices low. This will no longer happen.
Just shows again, when government gets involved with the free market bad things happen to the consumer.

2008 Jun 16 09:41 AM

[bluesmoke:]

One thing no one has mentioned - with an electric or hydrogen vehicle why would we need a gas station? I guess for a lawnmower, boat, rv, jet ski, vintage car, etc. But I think they see the writing on the wall.

2008 Jun 16 09:56 AM

[PhilinMillc...:]

Exxon and the other major oil companies were the source of almost all of the great innovations in gasoline marketing. When they pull out of the retail sector in the USA, we'll all lose in terms of quality and safety of retail sites, competitive prices, skill and maturity of retail staff, and technical advances in pumps and storage systems. A curse on the venal U.S. Congresspeople who for years have beaten on "Big Oil"--when they themselves have lived off the taxpayers and never created any new business or anything else of any value. I wish they could all be sent to one of their favorite countries--Cuba.

2008 Jun 16 12:02 PM

[c300man:]

Why can't we just randomly select our congressmen from a prequalified pool of willing people - just like we select a jury. Determining a defendants fate is probably more important than most of what congress works on.

Let them serve their country for six years at good pay. Just think, no campaigning for reelection. Outlaw lobbying too.

2008 Jun 16 03:09 PM

[jdb:]

The major oils have subsidized the retail price of gas for years.
The independent dealers would be eligible for monthly cash incentives if they maintained volume goals on gasoline sales. The competition between the companies was fierce. It's a shame that congress didn't know this, and if they did, how they ignored it for the kangaroo hearings and publicity that came with them. Less incentives means higher retail prices, and higher taxes on each gallon. All while China drills for oil off Key West. These guys are geniuses.

2008 Jun 16 03:25 PM

[benzina:]

so Gentlemen
shall we sell our XOM stock or what? and investing in green energy? like Hydrogen Hybrid?
hello anyone?

2008 Jun 20 05:44 PM

[tylakewalker:]

You people complaining about congress and government harassing the oil companies have got it all wrong. Exxon recently sold its gas stations in Brazil to an ethanol producer in Brazil, Cosan. This is not about U.S. politics/regulation. It is much bigger.

2008 Jul 01 11:03 AM