L.A. Gas Station Owners Await Impact of Arco Sale

LOS ANGELES -- The landscape of Los Angeles County's gas stations could soon change as a result of BP's plans to sell its Carson refinery and the region's Arco gas stations, according to a report by the Los Angeles Business Journal.

"We're kind of in limbo right now," said George Barseghian, operations manager for Meetra Inc., which owns 12 Arco stations countywide. "We don't know who's going to take over, what our relationship will be with the newcomer and how it will affect our supply. We just don't know what's going to happen and whether their policies will change."

BP recently announced that by the end of next year, it intends to sell its Carson refinery and all Arco stations in Southern California, Arizona and Nevada. The company also said it will sell its refinery in Texas City, Texas. Analysts put the number of Arco stations involved at more than 400 -- most of them in Southern California and half of which are independently owned.

The independents rely on BP for their fuel supply, as well as the identity and promotion of the oil brand, the report stated. Arco supplies about 25 percent of the gas purchased in L.A.

"The outcome will depend entirely on who BP sells Arco to," said Tim Hamilton, a petroleum industry consultant in Olympia, Wash., who works with independent gas dealers including many in Southern California. "If it sells it to someone fragile, then the franchises could have a bad experience. If the buyer, on the other hand, is better than BP then their experience will be good."

Because of antitrust laws, Hamilton said it is unlikely that the buyer will already be doing business in Southern California. "Chevron, for instance, probably can't buy it," he said. "The most likely scenario is that they will sell it to a company that no one recognizes here."

Jay McKeeman, vice president of government relations for the California Independent Oil Marketers Association, a Sacramento-based trade group, fears a potential "market retreat" by whatever company that turns out to be. Under such a scenario, he said Arco's new owner would abandon the independent stations, leaving the station operators to fend for themselves in the spot market, potentially destabilizing their retail price. "That would be very problematic," he told the business journal. "Arco-branded stations would clearly be at risk."

Judy Dugan, research director of Consumer Watchdog, an advocacy group in Santa Monica, agreed. "The fact remains that Arco has generally been the cheapest gas in most local markets and I don't think that's likely to last," she said. "Who would buy the company and say, 'Jeez, I guess I'll undercut my own brand by selling Arco cheap?'"

Charles Langley, senior gas analyst for the Utility Consumer Action Network, a consumer advocacy group in San Diego, believes there could be a ripple effect.

"Arco has a tremendous amount of market power and is extremely competitive," he said. "They are cost-cutters. If I were an Arco dealer, I'd be very concerned."

Charlie Mulcahy, who's owned an Arco station in Wilmington for 30 years, said he's worried. He recently spent more than $30,000 on a point-of-sale payment system that allows customers to use ATM cards at the pump, and isn't happy about the element of uncertainty.

"In gas marketing we have a saying: either you make fast nickels or slow dimes. Arco is into fast nickels. If they decided to change their profile and all of a sudden we were high priced, I'd have to really scratch my head," Mulcahy said.

BP has said it expects to get at least $4.4 billion for the refineries and stations -- subject to approval by the Federal Trade Commission -- as part of a move to divest $30 billion in assets to cover costs associated with last year's disastrous spill in the Gulf of Mexico.

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