On Wednesday more than 50 Lukoil gas stations in New Jersey and Pennsylvania increased their prices to more than $8 a gallon in protest against the pricing activities of Lukoil North America.
Lukoil sells gasoline to its franchise stations at an average of 7 cents per gallon more than other companies, and that that figure can be as much as 25 cents in some places. This clearly puts Lukoil station owners at a serious price disadvantage. Lukoil uses zone pricing when selling its gasoline to stations, but this does not take into account the price of gasoline at nearby stations, allowing room for huge differences in gasoline prices, which is driving customers away.
Being sick of seeing competitors sell gasoline to the public for less than they buy the fuel from Lukoil, the station owners raised their prices in order to raise public awareness of this unfair situation.
Kay Kezbari owns a franchise in Philadelphia, NJ, and stated that his colleagues have had to beg Lukoil to lower its prices before. “We are not looking to get rich. I am trying to survive.”
Roger Verma, who co-owns four Lukoil stations and three Exxon stations, said that he pays 18-20 cents a gallon more for gasoline from Lukoil than from Exxon. Verma said that “I, as a consumer myself, won't go to Lukoil. How can I expect my customers to?”
Steve Hamparsumian said that his gas station was purchased by Lukoil about six years ago, since which he has lost nearly 50 percent of his business, whilst at the same time his rent has tripled.
Sal Risalvato, the executive director of the station owners group who organised the protest, said that the protest will only last 24 hours, although further action will be taken if their demands are not met.
By. Charles Kennedy of Oilprice.com
Charles is a writer for Oilprice.com