Royal Dutch Shell Group .com

Miami Herald Tribune: Station owners facing losses in sales



Posted on Sun, Jun. 06, 2004


While some Shell and Texaco dealers' fuel sales have returned to normal levels, others claim sales are still off.


The pumps are back on at South Florida Shell and Texaco outlets, but station operators are still feeling the pain from a holiday weekend with no sales.


Fuel-quality problems forced Shell and Texaco station operators to suspend sales anywhere from 1 to four days beginning May 28, putting a huge crimp in station revenues over one of the busiest times of the year for gas retailers.


While some Shell and Texaco dealers' sales have returned to normal levels, others claim fuel sales are still off anywhere from 10 percent to two-thirds because drivers are filling up elsewhere.


''The bad publicity is affecting our business,'' lamented David Shapira, owner of Hallandale Texaco Service Center at 126 N. Federal Hwy. ''We are impacted badly.'' On Thursday, he estimated his sales were down by half since the pumps were turned back on last Sunday.


Some drivers have the misimpression that there's still a problem with the gas, Shapira added. ''We have good fuel, and it's ready to be sold to the public,'' he said.


The fiasco has spawned at least a couple of lawsuits filed by angry motorists who claim their vehicles were damaged by the suspect gas and led the state to take steps to set new fuel-quality standards so it doesn't happen again.


The fallout stems from high sulfur levels found in gasoline that was supplied by the Houston-based Motiva Enterprises to Shell and Texaco stations in South Florida, Tampa and New Orleans. Motiva instructed dealers to halt sales of regular and mid-grade gas on May 27 after detecting high levels of sulfur, which was causing gas-gauge sensors in vehicle fuel tanks to go haywire. In response, dealers sold premium gas at regular-unleaded gas prices.


The next day, Motiva announced the suspension of all gas sales at about 420 Shell and Texaco stations throughout southeastern Florida. Most stations began selling fuel again the following day, Saturday, May 29. But the crisis hadn't fully passed until Wednesday morning.




In the aftermath of the sulfur problem, Motiva has been swamped with complaints from drivers claiming damaged gas gauges. More than 9,000 drivers had filed claims with Motiva as of Tuesday, before it stopped providing updates.


Observers calculate that between removing the tainted gas from station tanks, cleaning the fuel lines, resupplying gas stations and satisfying customer claims, Motiva's costs related to the sulfur problem will run into the millions. Motiva, which is owned in part by Shell Oil, isn't disclosing any figures.


While some dealers have commended Motiva for quickly devising a plan for dealing with customers' claims, the dealers now want to know what Motiva's going to do for them.


''Motiva is currently collecting data in order to conduct discussions with retailers and wholesalers in regard to compensation for any direct out-of-pocket expenses associated with the removal and replacement of product during this event,'' Shell Oil Products spokeswoman Karyn Leonardi-Cattolica wrote in an e-mail. ``These expenses would include unsold product returned to the terminal and premium unleaded gasoline downgraded and sold as regular unleaded.''


Motiva's response didn't address what, if anything, it will do for dealers who suffered one or more days of lost sales.


''They say they're going to do absolutely nothing,'' said Juan Carlos Diaz, who owns four Shell stations in Miami-Dade County. He said he lost about $50,000 in sales on Friday, May 28, alone. 'We said we lost money. Their response is, `Hey, we lost business, too.' But we said, 'It's not our fault.' ''


The situation may worsen already contentious relations between the parent company and some independent Shell and Texaco dealers, who are already engaged in a legal tangle with Motiva and Shell Oil. The dealers have alleged the oil company is manipulating gas prices in a scheme to push independent dealers out of business and take control of pump sales.




A Shell spokeswoman, while denying the oil giant prices uncompetitive, told The Herald in February it is putting in a system that enables it to control the pumps.


''This could be the straw that breaks the camel's back,'' said Thomas Bleau, a Los Angeles lawyer representing some South Florida station owners in litigation with Motiva and Shell, about the high-sulfur gas.


The lost sales over the Memorial Day weekend may make it difficult for some dealers to come up with their monthly rent payments, Bleau said. Some of the dealers interviewed by The Herald said they pay from $10,000 to $15,000 a month in rent.


Neil Cohen, who owns a Shell station in Delray Beach, estimated he lost $6,000 in May.


''I will have to take money out of my personal checking account and put it into the corporate account to pay some bills because of what happened,'' Cohen said. ``These stations are barely profitable as it is.''


Station owners believe it's only fair they receive some form of rent abatement or credit for lost sales.




Whether they get anything may depend on their contracts with Motiva, according to Scott Korzenowski, a Minneapolis lawyer who represents dealers in disputes with manufacturers and suppliers.


''I don't think there's any doubt the dealers suffered a loss,'' said Korzenowski, a partner with Dady & Garner. ``But the question is, does the supplier have a legal duty to make sure that the dealer has an adequate supply of gasoline? Unless it says so in their contract, the answer would probably be no.''


Business-interruption insurance may not be a solution, either. One dealer said he has to be shut down for at least two weeks before filing a claim. Another said the deductibles are so high it wouldn't be worthwhile to file a claim.


Meanwhile, some Shell and Texaco customers aren't happy with how Motiva and Shell responded to the sulfur problem. Two Broward residents have sued the companies for violating the Florida Deceptive and Unfair Trade Practices Act. The lawsuit alleges the company continued to dispense gasoline even though it knew the fuel had high levels of sulfur.


The 13-page suit was filed in U.S. District Court in Fort Lauderdale on Tuesday. The suit seeks certification as a class action. No damage amounts were specified. A similar suit has been filed in New Orleans.


In Florida, the furor has set in motion a plan at the state Department of Agriculture and Consumer Services. The agency plans to file a rule that will set new standards for elemental sulfur in fuel.

Click here to return to Royal Dutch Shell Group .com