NATIONAL CONGRESS OF PETROLEUM RETAILERS, INC., Mr. WILLIAM F. DEMAREST, DEAR BILL: The enclosed is for the information of the subcommittee. As you will note, Jack Houston's letter to Mr. Maple describes the pricing practices of several major oil companies in Georgia. The letter from Harold Grindle relates to Sohio pricing practices in Ohio and Shell's lease arrangements with a particular dealer. In addition, I have enclosed a FEA Survey Report on Retail Gasoline Pricing Practices in Maine. While the report does conclude that the marketing activities of the jobbers and major oil companies are not to be considered illegal, it does point up our contention that the pricing practices of both jobbers and majors are forcing independent branded dealers from the market. It also concludes that existing FEA regulations are not "infringing on or fostering price variances." The contention of both jobbers and majors has been that FEA regulations are responsible for the pricing problems. Sincerely, Enclosures. IVAN MAPLE, CHARLES L. BINSTED, Executive Director. GEORGIA ASSOCIATION OF PETROLEUM RETAILERS, INC., Federal Energy Administration, DEAR IVAN: Conditions in the marketplace continue to destroy the competitive viability of the independent branded and the independent unbranded gasoline retailers in Georgia. The motorists are the ultimate losers. For example, Shell Oil Company, operating gasoline retail outlets with employees, is selling gasoline for 52.9¢ a gallon. This price includes 1.7¢ for local sales tax. With an actual retail price of 51.2¢ a gallon, Shell is competing with its own retailers to whom they sell the same product at wholesale for 46.8¢ a gallon. Shell is charging its retailers a rent on station properties of 1.75¢ a gallon. Shell obviously has a rental cost factor at the company operated station equivalent to the rent charged the retailers. Therefore, Shell retailing at 52.9¢ less applicable sales tax of 1.7¢ as required by law to be added to the actual retail price, less the amount of their cost for rent (1.75), would realize 49.4¢ a gallon out of which Shell covers its wholesale price of 46.8¢. This leaves 2.6¢ a gallon margin for Shell to cover the retail outlet operating expenses. Shell, operating a station at Wesley Chapel Road and I-20 at a retail price of 51.9¢ which I personally observed, would have only 1.6¢ a gallon to cover operating expenses. Shell is meeting on the nose the big unbranded independents in the area. Exxon is operating similar to Shell as is Gulf and some others. Gulf prices are generally 52.9¢ a gallon with a wholesale price to its retailers of 47.78¢. Removing the sales tax of 1.7¢ and the rent Gulf charges retailers (1.75¢) in addition to the Dealer Tankwagon Price (DTW) of 47.78¢ leaves only 1.6¢ to cover the retail outlet's operating expenses. For your information I have enclosed sample evidences to back up the figures used in this letter. The examples are for retailers who are in competition with company operated stations for which I secured the retail sales ticket for the purchase of one gallon-shown on the same page with the invoice showing DTW prices. I understood during our phone conversation the other day that Mr. Barron and Mr. Owens claimed Exxon and Shell were selling gasoline at retail prices at the same prices they charged retailers for the product at DTW prices. Both men apparently intended to say that many local jobbers in Georgia are doing just that. The big companies have rarely, if ever, priced that low to my knowledge. |