U.S. Lukoil Station Owners Caught in the Crossfire of Russia's Ukraine Invasion

NATIONAL REPORT — As Russia's invasion of Ukraine continues, consumers have decided to boycott U.S. gas stations carrying the banner of Moscow-based PJSC Lukoil Oil Co. However, most of the 230 U.S. Lukoil gas stations are owned by individual American franchisees, and the boycott may not hurt the parent company that badly, according to experts.

"Retail gasoline sales are a tiny portion of the revenue of oil companies," Tom Kloza, global head of energy analysis at research firm IHS Markit, told CNN. "When you compare their production of crude and trading cargos and barges, it is a small fraction of their business."

Most of the Lukoil-branded stations in America are located in New York, New Jersey and Pennsylvania, and their American owners make a living by doing much more than just selling gas, Jeff Lenard, vice president of strategic industry initiatives at NACS, told the news outlet.

In New Jersey, the Newark City Council voted on March 2 to suspend the licenses of local Lukoil gas stations and convenience stores.

"This is in solidarity with Ukraine," said Councilman Anibal Ramos, who sponsored the resolution suspending the licenses of at least two Lukoil stations in Newark, reported NJ.com.

However, Sal Reselvato, head of New Jersey Gasoline and Convenience Store Association, called the move "political theater" that only hurts local business owners and their employees.

"Nothing about it makes sense," Reselvato said. "For the small business owners who have invested hundreds of thousands of dollars for these franchises, how will they pay their rent, their mortgages and their employees?"

Lenard told CNN that retail fuel businesses are especially vulnerable to boycotts since they don't have much flexibility when it comes to the brand they operate under. Station owners generally must sign long-term contracts with oil companies to get that branding, making a switch to another brand next to impossible.

"Boycotting a specific store because of the brand won't affect the oil company. Instead, organized boycotts can have a significant negative effect on the local retailer that is locked into that long-term contract," Lenard said.

"The history of boycotts against oil companies is a history of mostly failures," said Kloza. "People are prone to filling up where it's convenient and where the price is right. And they put politics aside when they do that."

The IHS Markit executive recalled a boycott on CITGO Petroleum Corp. when former Venezuelan president Hugo Chavez was in power. "People organized boycotts against CITGO," he concluded. "Now, CITGO is pretty much moving along just fine."