Citgo Won't Sell Gas to U.S. Stations
- From: "Jim Higgins" <gordian238@xxxxxxxxxxx>
- Date: Thu, 13 Jul 2006 09:16:26 -0400
Citgo Won't Sell Gas to U.S. Stations
http://www.chron.com/disp/story.mpl/ap/fn/4043093.html
CARACAS, Venezuela - Venezuela-owned Citgo Petroleum Corp. has decided to
stop distributing gasoline to 1,800 independently owned U.S. stations,
shedding a lackluster segment of its business while forcing the owners of
those stations to find other suppliers.
While it may create some logistical headaches for gasoline retailers in the
short term, the move should not have any impact on the nation's overall fuel
supply.
Citgo, which is wholly owned by Venezuela's state oil company, currently has
to purchase 130,000 barrels a day from third parties in order to meet its
service contracts at 13,100 Citgo-branded stations across the U.S. This is
less profitable than selling gasoline directly from its refineries.
Instead, the Houston-based company has decided to sell to retailers only the
750,000 barrels a day that it produces at three U.S. refineries in Lake
Charles, La., Corpus Christi, Texas and Lemont, Ill., according to a
statement late Tuesday.
As a result, the Citgo brand will disappear entirely from 10 states and be
less common in four additional states by March 2007, when the change goes
into affect, Citgo spokesman Fernando Garay said Wednesday.
The impact on affected Citgo-branded stations will depend a lot on local
market conditions, said John Eichberger, director of motor fuels at the
National Association of Convenience Stores, a trade group that represents
independently owned gas stations.
Station owners in competitive markets shouldn't have any problem finding a
new supplier who offers them comparable contract terms and may even cover
the costs of installing new signs and canopies, Eichberger said. But those
selling gasoline in more remote areas will presumably have fewer good
options.
One alternative is to shun the major gasoline brands altogether and purchase
fuel from an independent distributor. "Unbranded stations typically get a
better price at wholesale," Eichberger said. "But the inherent risk is you
lose your spot in the pecking order in getting product if there's a
shortage."
Venezuelan President Hugo Chavez has long claimed that parts of Citgo's
business produce losses for Venezuela and constitute a subsidy for the U.S.
economy.
Oil Minister Rafael Ramirez has also charged that Citgo isn't profitable
enough and that its parent, state-owned Petroleos de Venezuela SA, or PDVSA,
could at some point sell off some of the company's refineries. Garay said
Wednesday he knew of no plans for Citgo to sell its U.S. refineries.
However, in a sign of the apparently lucrative relationship between the two
companies, PDVSA announced Wednesday that it has so far earned $400 million
in dividends this year from Citgo.
The states where Citgo will stop selling gasoline are: Iowa, Kansas,
Kentucky, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma and
South Dakota. A limited number of stations in Illinois, Texas, Arkansas and
Indiana will also be affected.
Venezuela is the world's fifth-largest oil exporter and the U.S. is its top
buyer. The United States relied on Venezuela for about 11 percent of its oil
supply in 2005.
--
The brave may not live forever but the timid do not live at all
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