USA Petroleum Closes Stations Because Fuel Cost is Too High
Valero to Acquire Ultramar Diamond Shamrock
Shell Upgrades Hawaiian Stations
GATX Sells Calnev Pipeline to Kinder Morgan
PEI to Join National Association of Convenience Stores Trade Show

USA PETROLEUM CLOSES STATIONS BECAUSE FUEL COST IS TOO HIGH

AGOURA HILLS, CA. — USA Petroleum turned off its dispensers and turned away customers in April because the independent retailer was unable to buy fuel at a competitive price.

One of the few independent marketers remaining in Southern California, USA Petroleum is supplied primarily by purchasing fuel on the spot market. In April, gasoline on the spot market in California was selling for approximately $1.90 per gallon.

In a letter posted at the stations penned by USA President Mark Conant, he explained that the company did not want to tarnish their reputation by raising prices to a level substantially higher than the rest of the market. Instead, they chose to "temporarily stop selling gasoline" as the best way to keep customer goodwill without taking huge losses as a company.

USA closed its stations in Northridge, West Los Angeles, Thousand Oaks, and Camarillo, CA., due to the price spikes.

It has been rumored that USA may adopt a major brand to avoid supply problems in the future — perhaps the Chevron brand — but these stories are unconfirmed at this time by either USA or Chevron.

VALERO TO ACQUIRE ULTRAMAR DIAMOND SHAMROCK

SAN ANTONIO, TX. — In a move that will again shift the supply options for independent petroleum marketers, Valero Energy Corp. has announced that it will buy Ultramar Diamond Shamrock Corp.

The merger of the two companies will create the second largest refining company in the United States, behind ExxonMobil but surpassing the capacity of a combined Phillips Tosco.

Valero will also be one of the largest gasoline retailers in the United States and Canada, operating over 5,000 stations and convenience stores. In addition, Valero would have over 23,000 employees and 13 refineries in the United States and Canada.

The combined company would keep the Valero name and will be headed by the current Valero Chairman and CEO William Greehey. Jean Gaulin, Ultramar’s chairman and CEO, will retire when the deal closes, the companies said.

"We will benefit from enhanced financial performance through realization of numerous potential synergies among the facilities, including multi-refinery purchasing and inventory optimization," Greehey said in a statement.

Industry associations are considering if they will support or oppose the merger. Many marketers are concerned about the impact the merger would have on the already consolidated market in California.

In addition, Ultramar Diamond Shamrock is considered the major supplier to the independent market across the Pacific states. There are concerns that this source of supply could evaporate if the merger goes through.

The California Independent Oil Marketers Association reports that it is still polling its members to see if it will oppose or support the merger.

Steve Guensler, executive director of the Alliance Petroleum Corporation, a coalition of independent marketers, noted that the group is meeting with the California Attorney General’s office to discuss the merger "and there have been several conversations with the executives at both UDS and Valero."

Guensler noted that the Alliance Board is concerned that Valero maintain its commitment to the independent market. The Alliance group has been supplied by Ultramar/UDS for many years. They are also examining issues including "the loss of competition with fewer refiners, reduction of credit limits coupled with rising prices, and branded versus independent supply and price inversions."

Other supply-oriented organizations are also examining the issue but none have taken a public stand.

The merger is subject to Federal regulatory approval.

SHELL UPGRADES HAWAIIAN STATIONS

HONOLULU, HI. — Shell has finished image upgrades to its 58 branded service stations in Hawaii.

Among the changes made to the stations were installation of larger signs with enhanced colors, brighter lighting, increased use of flowers in station landscaping, and new trash cans and windshield cleaning units.

Shell employees were also given redesigned uniforms and provided additional customer service training.

Shell operates 24 stations on Oahu, 13 on Maui, 12 on Hawaii, and 9 on Kauai.

GATX SELLS CALNEV PIPELINE TO KINDER MORGAN

CHICAGO, IL. — GATX Corporation has completed the sale of the Calnev Pipeline to Kinder Morgan Energy Partners, L.P. for $375 million.

The purchase price includes $360 million in cash and $15 million in assumed liabilities.

Announcing the sale, Ronald Zech, chairman of GATX, stated, "We are pleased that the California Public Utilities Commission approved the Calnev sale and that we were able to close the transaction with Kinder Morgan."

This transaction completes the sale of essentially all of GATX Terminals’ domestic operations.

Zech added, "The sale of GATX Terminals’ domestic operations has been a complex and lengthy process. Our focus will now shift to the sale of GATX Terminals’ primary remaining operations, the Asian terminals and joint ventures."

PEI TO JOIN NATIONAL ASSOCIATION OF CONVENIENCE STORES TRADE SHOW

TULSA, OK. — In a different type of industry consolidation, the Petroleum Equipment Institute (PEI) and the National Association of Convenience Stores (NACS) will combine their trade shows beginning in 2002.

PEI’s Convex, which held its 50th anniversary last year, has been the leading petroleum equipment show for many years. Under the new agreement, NACS will eliminate its "Petroleum Pavilion" section and, instead, incorporate the Convex show into its trade show.

The petroleum equipment-specific section of the trade show will be renamed the "PEI Pavilion."

According to PEI Executive Director Bob Renkes, "A growing number of PEI distributor members have been compelled to attend two trade shows in the Fall: PEI and NACS. Distributors attend the PEI show to see the broad spectrum of petroleum marketing equipment presented at Convex. They attend the NACS Show because their customers are there. Combining shows will save them time and money." Renkes added, "Over 84% of our exhibitors at Convex told us in a recent survey that it was very important that they see more end-user customers at the trade show. A combined PEI-NACS Show virtually guarantees that more distributors and end-users will be on hand to visit their displays."

In the combined trade show, the PEI will sell space for the PEI Pavilion and will adopt the NACS fee schedule for both exhibitors and attendees.

In addition, the PEI will continue to hold its own educational sessions, 10-Group meetings, Young Executives programs and social events in conjunction with the NACS Show.

The first joint convention will be held at the Orange County Convention Center in Orlando, FL., on Oct. 5-8, 2002.

Originally published in the June 2001 issue of O&A Marketing News.
Copyright 2001 by KAL Publications Inc.