CITGO Says Sales Unaffected By Proposed Boycott

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CITGO Says Sales Unaffected By Proposed Boycott

HOUSTON -- Despite statements by some CITGO retailers that they're seeing fuel sales fall as a result of Venezuelan president Hugo Chavez' remarks against U.S. president George W. Bush, a CITGO spokesman said the company has yet to see any impact.

"The company has seen no impact on sales volumes from any calls for a boycott of our products," spokesman Fernando Garay told The Associated Press.

Observers say CITGO's claim is likely accurate, although verifying it is difficult since the privately-held company doesn't disclose financial data or sales.

An Aug. 28 report from ratings agency Standard & Poor's noted much of CITGO's free cash flow is returned to its parent company, Petroleos de Venezuela S.A., through dividends. CITGO has returned nearly $1.2 billion in dividends to state-owned P.D.V.S.A. since the start of 2005, according to company news releases.

The S&P report also said that because CITGO doesn't own its U.S. filling stations, it "does not benefit directly from convenience store and other nonfuel revenue."

Meanwhile, scattered reports of falling sales at CITGO stations have surfaced in states like Oklahoma, where one distributor last week reported drops of 10 percent to 15 percent after Chavez' U.N speech. But experts say it's hard to definitively link the trend to Chavez alone, since sales may be influenced by CITGO's July announcement that it would move out of parts of the Midwest, as well as Oklahoma, Kentucky and northern Texas by March 2007 and refocus on core markets in the East and Gulf Coast.

In the long run, experts told the AP that CITGO isn't likely to suffer significant economic harm, given the failure of past oil company boycotts, such as the anti-Exxon campaign after the tanker Exxon Valdez spilled oil along Alaska's coast in 1989.

"Unless the refineries participate in a CITGO boycott, it would be hard to hit them," said Noel Maurer, a Harvard Business School assistant professor.

And price usually wins out over principles in the petroleum market, where oil companies have an incentive to sell as much gas as possible through their own branded stations, rather than through other retailers' outlets, according to The Associated Press.

Companies' ties with political regimes of varying stripes around the world make it difficult for consumers to buy any brand of gas free of anxiety about whether they're doing the right thing. Complicating it all is a many-layered global oil refining and distribution system that makes it difficult to track the product's path from below the ground to the gas tank, the report continued.

"Most people are going to make a decision on where they pull in to fill up their tanks based on price and convenience," said Tom Kloza, director of Wall, N.J.-based Oil Price Information Service. "There aren't going to be a lot of folks who say, 'I'm not going to buy there because Hugo Chavez is going to benefit if I buy from CITGO.' These boycotts tend to make some noise, but they don't tend to get much traction out there."

A poll by MSNBC revealed that consumers feel differently than what Kloza believes. Out of 957 respondents, 76 percent felt that CITGO should be boycotted because of Chavez's remarks. Only 18 percent believed that Chavez's comments and the boycott were unnecessary, while 5.6 voted for "Who is Hugo Chavez? And who cares what he has to say?"

Even retailers are feeling the heat from Chavez's comments. In a CSNews Online poll, 19 percent of retailers felt that the comments made were affecting sales and would consider switching fuel suppliers because of it. In addition, 27 percent of retailers felt that it would seriously affect sales, while 35 percent felt that it will affect sales. Nine percent did not know if there would be an effect and 10 percent felt it would have no affect.

The CITGO boycott is one topic that CSNews' Spare Change Blog has been addressing since early October. To read more on the boycott and comments from readers, as well as provide comments or opinions of your own, visit the site by clicking here.