Posted in: Opinion,
by Patrick DeHaan on Dec 22, 2009 02:00 PM
As gasoline station competition becomes more fierce, it's hard to make enough profit for big oil companies to justify maintaining their brand or sales of fuel to stations as margins all but evaporate.
BP will cease to offer branded gasoline in areas of Pennsylvania in mid-2010 as competition among independents grows fierce. It is obvious that BP realizes there is a high level of competition in that area and they are being undersold by other companies at the wholesale level.
This comes after several other large players including Chevron, ExxonMobil, and ConocoPhillips vacate areas of the retail segment. Chevron announced just last week that it is pulling its name out of 12 states, affecting over 1,000 stations. (READ MORE!)
Many of the companies are pulling out of areas that are weak for their brand while maintaining their presence in areas that their brand name is stronger. While it is understandable for companies to leave weak areas, it is setting up a bad situation for motorists. If a weaker competitor were to just give in, it would leave less competition and ultimately may result in higher gasoline prices.
There have been some smaller chains selling stations as of late as well, a worrisome sign that consolidation is occurring at a faster pace than I thought. Unfortunately, there is little good that comes out of this story, unless it makes you feel better that your smaller, more local gas stations may be poised to make another penny or two on each gallon of gasoline. Just be careful not to blame individual stations for the rise in gasoline prices, they're just passing along their cost. While sometimes gas prices frustrate us, be sure not to channel your frustration at people who are helpless.