AAA News Release — 9/9/05


Station Owners Accuse Big Oil Company of Profiting From Impact of Hurricane Katrina

WASHINGTON, D.C. (Friday, September 9, 2005) – A growing chorus of Exxon dealers in the Washington metro area are raising their voices and accusing the world’s largest oil company, Exxon Mobil, of profiting from the exorbitant prices at the pump in the wake of Hurricane Katrina, a spokesman for AAA Mid-Atlantic confirmed today. In candid conversations with AAA Mid-Atlantic, a handful of local dealers accused the oil giant of raising their wholesale price to service stations by 24 cents in a 24-hour period.

A number of the Exxon dealers own and operate service stations in Maryland, which is posting an average price of $3.23 for a gallon of regular unleaded, according to this morning’s Daily Fuel Gauge Report from AAA Mid-Atlantic. Maryland has the third-most expensive gas in the nation. Of note, Washington, D.C. regained the top spot in the nation at $3.34, while gas in New York is $3.25.

This afternoon, Maryland Governor Robert L. Ehrlich, Jr. is slated to meet with industry representatives and dealers to determine why the state’s gas prices have skyrocketed in the aftermath of the natural disaster. The Exxon dealers are pointing the finger at their oil company.

The disgruntled dealers say the steep price increases put them on the horns of a dilemma, the auto club notes. By raising their prices, they risk losing their loyal customer base, which has taken them years to build. By raising their voices against Exxon Mobil’s practices, they risk losing their contracts.

For this reason, the station operators contacted by AAA Mid-Atlantic are requesting anonymity. Yet they are refusing to silence their tongues in the wake of a practice they are calling “unconscionable,” said John B. Townsend II, AAA Mid-Atlantic’s Manager of Government and Public Affairs. “The chafed dealers are also troubled because their competitors are paying less for their products.”

In fact, one station operator told AAA Mid-Atlantic his wholesale price is now 68 cents higher per gallon than a nearby independent station, which is currently buying gas on the volatile spot market. Another Exxon dealer complained that a nearby branded station’s wholesale price was 30 to 50 cents cheaper than Exxon stations.

“The pricing war has sparked a shooting war of words between the dealers and the oil company,” Townsend observed. “The timing of the ruffled dealers’ complaint comes just as federal, state and local officials are investigating whether price gouging is taking place across the region and the nation.”

“Earlier this week on Capitol Hill some members of the Senate Energy Committee lambasted the oil companies for profiteering in the aftermath of the hurricane. In an ironic twist, Exxon dealers are making equally stern statements about their own oil company, accusing it of making windfall profits at the expense of price-weary consumers.”

“Like Toto in The Wizard of Oz, these dealers are pulling back the curtain on the practices of big oil,” Townsend commented. “They are accusing the companies of pulling the levers to create the illusion that they are not raking in cash and profits or taking advantage of consumers in the wake of the greatest natural disaster to hit America.”

“To investigate the claim, we have talked to area dealers who wanted consumers to know what is going on behind the scenes,” Townsend said. “Area dealers accuse the company of passing on the higher costs to them, which is, in turn, passed on to shell-shocked motorists who are already reeling from the high cost of gasoline.”

The verbal civil war continues to rage between Exxon Mobil, the world’s largest publicly traded oil company, and its perturbed dealers in the area. The oil company says individual dealers flying under the Exxon banner set their own retail price. The vast majority of Exxon stations are owned or operated by individual dealers who purchase their fuel products from Exxon Mobil.

The energy giant recently earned the third-highest quarterly profits in the company’s history. During the second quarter, its revenue jumped 25 percent to $88.57 billion. According to industry watchers and the media, the company is “on a pace to surpass Wal-Mart Stores Inc. this year as the largest U.S. company by total revenue.”

In a news release issued last Friday, Exxon Mobil announced it was increasing its supply of gasoline to the U.S. Gulf Coast to “help ease customer demands in regions hit hardest by Hurricane Katrina.” It also stated: “The company encourages its independent dealers and distributors to act as responsible neighbors in their communities in this difficult situation.”

“Area Exxon dealers are accusing the energy colossus of failing to practice what it preaches,” said Townsend.