August 1, 1975
Page 26904
THE GASOLINE RETAILER: THE MAN IN THE MIDDLE
Mr. MUSKIE. Mr. President, in the last two years gasoline prices have sky-rocketed. Consumers are angry and the major oil companies have begun expensive advertising campaigns to explain the price increases. Caught in the middle are the retail gasoline dealers.
These small businessmen, often owning only one station, have been faced with staggering problems — new Federal forms, increasing operating costs and pressure from their suppliers.
Last month, Phil Pimental, the president of the Pine Tree Gasoline Retailers Association of Maine, appeared on Portland's WGAN-TV news program, "At Issue," to discuss some of these problems.
I believe it is important that we all understand the problems of retail gasoline dealers and I ask unanimous consent that the transcript of the program be printed in the RECORD.
There being no objection, the transcript was ordered to be printed in the RECORD, as follows:
TRANSCRIPT OF "AT ISSUE" — WGAN-TV, PORTLAND, MAINE,
JUNE 29, 1975,
PHIL PIMENTAL, PRESIDENT, PINE TREE GASOLINE RETAILERS ASSOCIATION
INTRODUCTION
Phil Pimental is President of the Pine Tree Gasoline Retailers Association. It's an association made up of about 250 members. They're owners and leasers of gasoline stations in the State of Maine. The Association was formed in March of 1974. According to Mr. Pimental, it was formed to solve problems in three areas: Problems between the retailers and the suppliers, or the oil companies; between retailers and consumers; and between retailers and various branches of government, the federal and state government.
Q: Phil, you say 70¢ a gallon this summer. What's the reason for the high cost of gasoline?
A: Well, taxing right now is one of the big reasons. They're talking about 23¢ a gallon. They're talking in Washington about deregulating oil, crude oil, and if this happens, it means that a barrel of crude oil will go from about $5.25 now to somewhere in the neighborhood of $13 or $14 a barrel, which is what we're paying for imported oil now.
Q: Gasoline prices have taken a jump recently. There's quite a spread in the prices. We haven't seen the effects, I understand, of the President's action or Congressional action. What's the reason for this most recent increase in gasoline prices?
A: Well, I think that the oil companies are passing on what they tell us is the cost increase of the product and the cost of manufacturing. They're taking advantage right now because the price may be frozen or, if the federal government raises the price through taxation, then they may not be able to take that jump, because it would drive it up too fast.
Q: Do you think the public will be able to pay $1 a gallon for gasoline in a year?
A: I think it's going to be very hard. I think that people are going to have to face other ways of transportation. They're going to have to use other means of energy to heat their homes and to do these other things. But for years now in Europe, the price of gasoline, I believe the average price is about $1.35 a gallon. So they've gone to smaller cars, with more gasoline mileage. They've developed rapid transit, such as trains, buses, and this type of thing.
Q: I think what upsets some motorists is the sharp variation in gasoline prices in various communities, or even from one street corner to another. I think it was in the Legislature quite recently that a state representative from Somerset County complained of a thirteen cent price differential between the price of gasoline sold in Jackman and the price in Bingham. How do you explain such a difference?
A: We were involved in that, and we tried to find out why. They tell us that it's shipping costs and for various other reasons. The dealers are also very upset with such a price spread. But what seems to be happening is that you have a two-tiered price system, where the distributors are selling at one price and the major oil companies are selling at another price which is higher. So in many cases the distributor-owned station is selling gasoline for what the branded dealer has to pay on a wholesale. We had one instance in Sanford where a distributor was selling to three dealers at 48.9¢ a gallon wholesale. He was selling retail out of his own outlet at 47.9¢ a gallon, which we think is unfair competition.
Q: What is the usual mark-up in gasoline, and do variations in this mark-up account for why you can find gasoline for 52¢ at one corner and 58¢ down the block?
A: We're regulated by government controls right now, and we have a price spread of 10¢ a gallon in some areas. It depends on what was posted May 15th of 1973, because that is what they used as a base. Now at that time, some dealers were making 4¢ a gallon, and some were making 7¢ a gallon. And then we had the three-cent increase granted us by the federal government, which would raise that price margin.
Q: If a gasoline dealer wants to increase his prices, does he have to fill out forms for the federal government, does he have to comply with a set of regulations, or can he just go out and mark up his prices without doing anything?
A: No, he is already registered with the federal government as to what he was pricing on May 15th. So this is what he is regulated by, and there are penalties if he is caught going above his margin. Some dealers may only have a six-cent margin or seven-cent margin, so they can't go above that. So they are regulated.
Q: So we are still quite a ways from going back to the free market?
A: Oh yes. The regulations are due to expire the 28th of August. This is the deregulating. And if this is allowed to happen, that's when the barrel will jump from $5 to about $14 a barrel.
Q: There's a new law on the books, just signed by the Governor, that would govern motor fuel distribution and sales. What exactly is this new law designed to do?
A: This is a dealers' bill of rights, you might say. It does things like, the oil companies or the lessor have to give the dealer 30-days notice, and it runs as high as 120-days notice prior to cancellation. In many areas, they don't have this type of legislation, and they can just walk in and arbitrarily cancel. Dealers may have spent a lot of time in the business, they may be in a place for ten or fifteen years, and they've built the business up, and an oil company may decide that they want to operate this as a company operation, so they go in and they cancel the dealer out. With this legislation, they can't do this. They have to show good cause why they're canceling him out. At the same time, the door swings both ways — one is if a dealer is caught price gouging, misbranding gasoline, things like this, he can be terminated immediately, because we don't want a dealer in business who is doing this kind of thing because it hurts all of us, and we're trying to overcome some of these things.
Q: Why was it necessary to protect the dealer from the major oil companies?
A: In several cases, they've said one thing and done other things. One case was just settled in Maryland, where BP went before a hearing in Maryland and said that they had no intentions of taking over stations, that their dealers had a secure future with them, and they turned right around and it was proven in court that they had in fact a program at that time, when they made these statements, of doing away with the dealers. There was a suit brought against them in the State of Maryland by ten dealers that won. They proved in court that they were fact trying to take over the stations.
Q: How about here in Maine? Is there any widespread practice at this time?
A: Not widespread. It’s confined to different areas. They seem to be picking off stations. Gibbs right now is working in this area of taking over dealers and trying to buy them out. One instance was where they tried to buy a dealer out for a dollar. We believe that they misrepresented and they muscled the dealer, because what they told him in some cases was, "We're going to take this station over, whether you want to or not. And if you want to go to court, fine But if you want to give us the station now, we'll give you a job with us as a manager." And these dealers may have been in business seven or eight years, and they expect them just to give the whole thing away.
Q: What's in it for a major oil company to want to take over a local service station and operate it themselves?
A: More profit, simply. They can operate a station direct, and they do away with the dealer, so therefore the profit margin that the dealer is going to make will be picked up by the oil company. In most cases, they're doing away with service stations — they're going to gasoline-only outlets This relieves them of the responsibility for automotive repairs, because right now a dealer in a full-service station that does automobile repairs is responsible for the repairs that he does. For instance, if you came into my station and I did a brake job on your car and it was faulty and you went out and had an accident, then I'm liable. Where if an oil company had this operation, then the oil company would be liable. And they don’t want this responsibility. They want to sell gasoline only. That's what they want to move, that is their product.
Q: Yes, there have been accounts in the national media, Phil, about representatives from oil companies putting pressure on local gasoline station owners to sell more products. Has this happened in Maine?
A; Yes it has. We've received calls from several dealers that they have been pressured to sell more gasoline. And we’re supposed to be using conservation methods right now. One of the reasons for this is, you have to understand how your leasing is set up. Now it's done on a cents-per-gallon basis. Like a dealer may be paying a cent-a-gallon rent for every gallon of gasoline that he pumps. So it's to the oil company's benefit if he sells more gasoline, because he’s going to pay more rent. So the oil company is going to make more money. We've written
to the FEA and to our representatives about this, trying to put a stop to it, and it seems to have slowed down now.
Q: What kinds of pressure are used by the oil companies?
A: They use things such as lease terminations, non-renewable leases, little things like maintenance, where a dealer may be responsible for something and the oil company says, "Well, if you bow to our wishes, we'll take care of this maintenance problem for you. If not, then you can take care of it yourself."
Q: Phil, just a few minutes ago we talked about the dealers' bill of rights law that has just been signed by the Governor. Could you tell us a little bit about the process of putting that through, because I think in talking before the program anyway, you indicated that you really learned something about state government by that experience?
A: Well, I think it's renewed my faith in state government and, somewhat, in federal government. We found that, when we first started putting this legislation together, that people who were dealers or just business people in the community who we talked to about this legislation, and that, well, you're going to have to have a lot of money to put this bill through. You're going to have to hire lobbyists and spread some money around to get this thing through.
Q: Excuse me, when you say "spread some money around", you mean to help the legislation through, not bribes or anything.
A: No, not bribes. Just to get legislation drawn up, to hire the right lobbyists to lobby for our bill, and to get people down there, pay people to come in to speak for our bill. You might call them expert witnesses. Well, we found that, at least I thought, that we didn't need to do this, and we went ahead with the bill. I gathered bills from about twelve different states. I drew up a rough draft of the bill that we had, and then we went down — at this time Governor Curtis was still in office — and I had talked to him about it, and he thought that it was some good legislation. And we went ahead and had the bill drafted up. At that point we contacted Senator Speeds and Representative LaPointe from Portland, and asked them if they would sponsor the bills for us, and after explaining to them what we were attempting to do, they said they would be happy to.
We spent quite a lot of time, dealers spent quite a lot of time, going down and talking to their representatives, calling them on the phone, writing letters, and we put the bill through. We had a little battle with the oil companies and some of the distributors, and they hired some pretty good lobbyists, but we still put the bill through for little or no money, other than attorneys' fees or something like this to have the bill put into legal language. So, I think that people should get more involved in their state government, and in their federal government. I think that if there are bills that need to be presented, or if there are bills that the public particularly doesn't like, that they should write to their representatives or call them, because I found that these people at the State House are more than willing to listen to you and more than willing to try to help you if you have a good reason, and if you can show them and take the time to tell them why.
Q: Who lobbied against you?
A: Well, we had Milt Huntington, who is Maine Petroleum Association. We had some of the oil distributors that also sell gasoline — they hired a couple of lobbyists to lobby against us. And it was just people in general. They brought in at the public hearings, oh, they must have brought in about 80 people, lobbying against the bill or talking against the bill. But we brought in our things people and told them documented things that had happened and why we needed the legislation.
Q: Do you have any idea, off the top of your head, how much was spent lobbying against your bill?
A: No, I don't. I haven't heard anything.
Q : Phil, as the Legislature is drawing to a close, the House and Senate have been wrestling with a few proposals to increase the state's gasoline tax, and as I understand it now, the tax stands at, the state tax is 9¢ a gallon, which is one of the highest in the country. The federal tax, of course, is 4¢. Now one of the proposals would just add a penny onto the state tax, raising it to 10¢. But House Speaker John Martin has proposed a different solution, one of which, as I understand it, would sock it to the summer people, and this would be done by imposing a 2¢ addition, but this would just be during the summer months, when the tourists come here. My question is, first, how do you feel about any additional gasoline tax, and second of all, if you had to choose one, which would you prefer?
A: That's a pretty tough question. I think that the people are at an end to taxation. They've been taxed quite heavily, and I think that a penny a gallon, if it is really needed, then it should be a penny a gallon. But I don't think that we should really penalize our tourist trade in the state for what we have. And I think If I had to make a choice, I think that it would be a year-round.
Q. At the start of the program, you mentioned the possibility of gasoline being a dollar a gallon at this time next year. I'm sure that to a lot of viewers this is a very scary thing for many people. You've seen the rapid rise in gasoline prices over the past two years. Has this, just from talking to your customers and other dealers, do you think that this has almost put an end to pleasure driving and that people are just buying the gasoline they need to get to and from work and to do their business rounds?
A: Well, I think it's hurt a lot of people, and they've had to cut back on their pleasure driving, which may have been one of their only recreations. It appears to me that the people who have the money are going to pay for it regardless of what the price is. And working people are going to have to suffer. That's why the Gasoline Retailers Association is against any more taxing on a federal level of gasoline in order to cut consumption, because you're hurting the people that they don't want to hurt. And we've offered solutions to this problem on a short-term and also on a long-term basis, where if they went to an allocation program — which we are still on, by the way, but people don't realize it — but the allocation is so high right now, that it doesn't make any difference. If you went to a 100% allocation, I don't think we would have to raise the price of gasoline much more than it is now, and we would cut back on the amount of imports that we would bring in. Right away, it jumps into people's mind, what about the lines that it's going to cause? Well, we didn't have any lines until we went below 80 percent, 75 percent. Then the lines started forming. A lot of this I think is panic buying. And if we went to 100 percent, I think we could achieve the million barrels a day on the imports, by cutting back the imports a million barrels a day.
Q: Do you see any return to gasoline lines and shortages in the coming months and years?
A: Well, it depends on what the OPEC nations do really, as to if they throw up another embargo; the next gasoline shortage — the last one we just had was a picnic compared to what would happen if they had another embargo.
Q: Phil, have you as an individual and the dealers as a group encountered any problems because you have organized and because you have started to speak out on behalf of yourselves?
A: We've had some pressure from some of the distributors, the major oil companies have been pretty quiet as far as dealers belonging to the Association, but some of our distributors have told dealers to stay away from our Association and since they didn't have leases, that they may cancel them.
Q: Is there anything in the bill of rights that protects any pressure from the oil companies or from the distributors?
A: Yes, there is. We have a clause in the contract now where they cannot coerce or pressure dealers in any way to buy extra products, like tires or batteries and this type of thing, and there is legal action that they can take if this pressure is brought upon them.
Q: Where? In the courts or in a state agency? Who do you go to? Who would a dealer go to if he felt he was pressured?
A: He could go to the courts. He could bring a law suit right into the courts.
Q: Or to your Association?
A: He could bring it to us — we're involved in a couple right now.
Q: Thank you.
Moderator: Michael T. Craig, WGAN-TV. Reporters: Ron Palmquist, WGAN-TV; Jerry Harkavy, Associated Press.