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BP floating financial lifeline to station owners

Oil giant BP PLC is floating a financial lifeline to the owners, operators and suppliers of the gas stations around America that bear its name and have been hit by boycotts.
/ Source: The Associated Press

Gas could become cheaper at some BP pumps after the oil company agreed to measures meant to help distributors and station owners offset a consumer boycott against BP fuel that was sparked by the out-of-control spill in the Gulf of Mexico.

BP PLC has offered to give distributors of its gasoline money back for every gallon of gas they purchase at terminals. The cash back amounts to 2 cents per gallon along the Gulf Coast and 1 cent per gallon in the East and Midwest, according to several dealers contacted by The Associated Press. BP confirmed the figures.

The distributors, who in many cases also own and operate stations, may pass along some of the savings to motorists in the form of cheaper gas, although that could depend on how badly a particular BP station is hurting.

Some BP-branded gas stations have reported sales declines of 10 percent to 40 percent from Florida to Illinois since the April 20 rig explosion that has tarnished BP's image, so certain owners may choose to pocket the cash.

The reaction Tuesday among the independent businesses that supply and sell BP gas was a mix of enthusiasm and concern.

Russ Scaramella, a BP distributor who owns and operates 65 locations in Arizona, Georgia and Florida, said that until he runs the numbers he is unsure how much the money would benefit him. He plans to distribute some of the funds to stations he supplies but doesn't own.

"It's all very overwhelming," Scaramella said.

The head of a trade group that represents distributors of BP gasoline in the U.S. told the AP that the company is informing outlets that they will be getting cash in their pockets, reductions in credit card fees and help with more national advertising.

"They are going to get a check," said John Kleine of the BP Amoco Marketers Association. "They're being given these dollars for use in their business."

BP says the cash to distributors is for gallons purchased in June, July and August.

Kleine estimates the total package BP is offering at roughly $50 million to $70 million.

The cash will be used by the distributors how they see fit, according to Kleine. That could mean a break to consumers filling up at BP-branded pumps. But some distributors may use the money to bolster their battered bottom lines.

BP cautioned that the cash allowance will not necessarily show up in the price of gas at the street as BP does not set or control the prices.

BP owns just a fraction of the more than 11,000 stations across the U.S. that sell its fuel under the BP, Amoco and ARCO banners. Most are owned by local businessmen whose primary connection to the oil company is the logo and a contract to buy gasoline.

It wasn't clear if the offers were being extended to stations that carry the ARCO banner. BP is the brand on marquees east of the Rockies, while ARCO is predominant on the West Coast.

In a large number of cases, the distributor of BP gasoline also is the owner or operator of BP-branded gas stations. But in some cases, there is only a supply relationship between the distributor and the merchant at the retail location.

The latter category is where Bob Juckniess falls into.

Juckniess, who has seen sales drop 20 percent at some of his 10 BP-branded stations in the Chicago area, said he was concerned that the cash is only being given to distributors.

"Will the money flow down to the site level?" he asked.

At the same time, he said he believes BP understands the damage the oil spill has done to the company's brand image, and thus to independent station owners.

"At this point, I think anything is good, and I think BP has an obligation to assist us," Juckniess said. "More importantly, we need to be able to pass that on to the customer and give them a reason to continue shopping at BP and to use that money to educate the customer that we are independent business people."

Kleine said it is in distributors' interest to make sure retail locations thrive, so he believes money will trickle down to everyone who needs it.

Kleine said that even with the offer from BP, distributors would still be free to sue BP and seek compensation from the $20 billion compensation fund if they choose.

BP spokesman Scott Dean confirmed in an e-mail to the AP that the package includes volume allowances and reductions in credit card fees that merchants pay when customers use their credit cards to buy gasoline and items in station stores.

"Teams of BP staff are also being deployed to help these independent businesspeople activate consumer loyalty programs at their sites to help retain consumers and to educate them on BP's response plan in the Gulf of Mexico," Dean said. "BP will continue to evaluate the programs and offers as the situation and environment evolves."

Dean added that BP is rolling out a marketing and advertising package that includes "Locally Owned, Locally Operated" media and marketing support such as point of purchase signage, radio, flyers, posters and postcards.

As to the compensation fund, BP spokeswoman Debra Reed said previously that the overseer of the fund has stated that anyone is welcome to file a claim.

Whether or not it is valid is up to the administrator.

Kleine said the 475 BP distributors in the U.S. were being notified directly by the company. Calls began Monday and would likely continue through Wednesday, Kleine said.

"There's a lot of variance in terms of the business effect of this incident," Kleine said. "To try to manage this nationally, it's just too big of an elephant. They recognized that the people that have the best knowledge and can apply the resources best are the local distributors."