Kadner: Gas prices baffle some Shell owners
By Phil Kadner email@example.com July 15, 2013 10:46PM
Updated: August 17, 2013 6:20AM
If you are befuddled by fluctuating gasoline prices, it may make you feel better to know that some station operators are just as confounded.
Glen Gorman, owner/operator of a Shell station at 171st Street and Harlem Avenue in Tinley Park, contends that he’s being forced out of business by the company that supplies his gas.
“Our gasoline supplier is forcing us to charge 20 to 30 cents a gallon more than other Shell stations in the area,” Gorman said. “A few years back, I was selling 170,000 gallons a month. Now, it’s 90,00 gallons a month.”
On Monday, Gorman’s Shell was selling gas for $4.19 a gallon while nearby Shell stations at 159th Street and Oak Park Avenue and 159th Street and 84th Avenue were selling the same gas for $3.99 a gallon.
Another Shell station, near a Jewel-Osco store at 159th Street and Central Avenue in Oak Forest, priced its gas at $3.91.
Why the disparity in price for the same gas?
Gorman said his problems began a few years ago when Shell announced it was pulling out of the Chicago market.
But Shell really didn’t pull out. Instead, it partnered with other companies, eventually selling all of its Chicago stations to them.
In 2009, Shell entered into a joint venture with Circle K and its parent company, selling about 100 stations in the Chicago area to that business.
In 2010, Shell entered into another joint venture with the Lyden Co., creating Truenorth Energy of Ohio, which took ownership of about 109 stations in this market.
Under the contract, Gorman’s station was forced to accept Shell gas through Truenorth.
“They raise their prices any time they feel like raising them, and I have yet to figure it out,” he said, expressing a sentiment shared by almost every motorist in recent years.
“I’m convinced Trunorth is trying to drive us independent operators out of business so it can take over the stations,” Gorman said. “How else can you explain why they would make us charge more for gas than Shell stations a couple of miles away?”
He said he has attempted to get answers to that question from Truenorth and Shell without success.
I telephoned both companies several times over the past month, asking the same question, but am still awaiting an answer.
Amit Patel, owner/operator of a Shell station at 167th Street and Cicero Avenue in Oak Forest, is in the same boat as Gorman. He has gone from selling about 300,000 gallons a month to 80,000 under Truenorth.
“They can raise the price of gas to us at any time without any explanation,” Patel said.
Several weeks ago, he said, he received a delivery of gasoline just before the price of gas dropped sharply. As a result, Patel was selling gasoline for $4.45 a gallon when every other station in the Southland was selling it for about 40 cents less.
On Monday, like Gorman, he was also selling gas for 20 cents a gallon more than Shell stations supplied by the Circle K joint venture.
“It’s not like this is Kmart and Wal-Mart selling different brands of products for different prices,” Gorman said. “It’s the same gas company. It’s Shell. I’ve been here since 1983, and they won’t talk to me about this.”
Patel is just as frustrated with Truenorth
“You can’t refuse a shipment from them,” he said. ”And you can’t afford to sell it at a loss ... because you would go out of business. So I have to sell that gas at that higher price until it is gone because it’s already in the ground.”
Patel and Gorman claim that sort of event isn’t out of the ordinary.
The two independent owners explained that most of their profit comes from the sale of in-store items, not gasoline. But when customers stop coming to the station due to higher gas prices, their in-store sales suffer.
Gorman and Patel contend that Truenorth charges them 6.5 cents a gallon in various fees (including a 2.5-cent delivery charge) that Shell stations owned by the competing company are not charged.
“In the past, before Shell sold the stations, we were always priced competitively with other nearby stations owned by other gas companies,” Gorman said. “We could call and ask permission to sell our gas for less just to stay competitive in the market. Not anymore.”
Patel said he has contacted the Illinois attorney general’s office, hoping it would intervene on behalf of the Shell operators and their customers.
“I think Shell is engaging in an unfair method of competition,” Patel said. “But I haven’t heard back from the attorney general, and perhaps we will have to consider filing a lawsuit ourselves.”
Patel also believes Truenorth intends to drive its independent owner/operators out of business so it can take over their stations and remodel them.
“Most of the Truenorth stations seem to be older, with the smaller stores that have less space for items,” hel said. “You could make a lot more money by expanding the space.”
Patel said he wanted to invest in a store expansion, but Truenorth wouldn’t agree to grant him a long-term lease for the store.
“If Truenorth is being forced to sell gas for more money than other Shell stations in the area by Shell, it seems to me it could claim it was defrauded,” Patel said. “But I haven’t heard that from Truenorth.”
Gorman became so angry that he posted a letter to his customers on gas pumps, telling them Truenorth was going to force him to close his business.
He claims that Truenorth “went ballistic and tore the notices down.
“I feel my only chance now is public opinion,” Gorman said. “I’m hoping Shell Oil will hate the bad publicity and step in. If something doesn’t happen soon, I’m going to be out of business.”
Gorman said his customers ask him all the time why his prices are so much higher than other Shell stations in the area.
“I tell them I don’t know,” he said. “That’s the truth.”