페이지 이미지
PDF
ePub

are

Mr. Cino. You have got two brands of unleaded.
The CHAIRMAN. I understand. Premium and regular unleaded.

Mr. Cixo. The shortage as I see it is in the high octane unleaded and the reason for the shortage is you only have three majors who are competing in that market for that product : Amoco, Shell, and Mobil.

Senator METZENBAUM. What would happen if you had decontrol with respect to those three super high octane unleaded gasolines?

Mr. Cino. The price of unleaded premium would go off the page.

Senator METZENBAUM. You don't agree with Mr. O'Leary it would go up a penny or two?

Mr. Cixo. That is ridiculous. First of all, the sales of Amoco and Shell for unleaded high octane premium are tremendous. In this Maryland area, for example, Amoco dealers are selling their unleaded premium well in excess of 50 percent of their total sales output.

In addition, it is obvious to me the Federal Energy Administration, and probably the Congress as well, has failed to see the importance of performance over price. We are getting a mistaken impression, at least the statements I have read, from energy people and congressional people, that prices are so important to the consumer. I don't think that prices are so important to the consumer. I don't think that is correct.

My experience and the experience of my dealers has been performance is more important than price. We know of cases where dealers

The CHAIRMAN. Why don't you use the conjunction and say performance and price.

Mr. Cino. When you arrive at a point where a consumer will buy a product regardless of what the price is at the pump, then price no longer is a factor. Performance is.

Senator METZENBAUM. The President and the Secretary of Energy have been suggesting if you increase the price, let's suppose you increase it to $1, there would be a diminution of demand. I gather you don't agree?

Mr. Cino. Only 4 years ago the price of gasoline was about 38 cents. I have not seen any major loss of consumption in this country over the past 4 years, and witness the events of this summer. You have had prices hitting the roof on unleaded premium gasoline. Shell, for example, beginning on March 1, ending on December 8, has raised the dealer tank wagon price approximately 312 cents a gallon.

Their demand of unleaded gasoline has gone off the page. As they have already testified. So here, they have had in a period of 8 months something resembling a 25 percent increase in refiner gross profit on gasoline. They have obviously had no downturn.

The CHAIRMAN. To follow up Senator Metzenbaum's question, if the price of gasoline—the word is "sudden" here—if the price of gasoline was $1 a gallon, demand at least for a period of time, would definitely be off, would it not?

Mr. Cino. You will have a sudden demand fall off but that will be all it will be. A sudden demand fall off.

The CHAIRMAN. I think all of the testimony we have had here follows from an economic point of view that casoline is one of the exceptions in the marketplace. It is inelastic. You are making the point it has almost doubled since 1973 but I think you missed the point, if

a

I may say so, in using that as an example, that it would not have any impact.

That has been a gradual increase. But if you have a sudden increase, if it was a dollar tomorrow, I think demand would be off some but I do believe the need for that product is one of the overriding considerations for the American consumer, the worker, whoever, because the automobile is the means by which you get to work.

I am trying to make a distinction between a sudden massive increase and a gradual increase. Don't you make that distinction?

Mr. Cino. Yes; I would agree with you. Unfortunately, the American people have a very poor memory when it comes to gasoline pricing: In the space of 3 months they will forget the price of gasoline and they will go about their ways as they have always done. They love their automobile.

The CHAIRMAN. Will you supply for us a bill of particulars as to what all of this is doing to the dealers? I think this is what we really need to know, Senator Metzenbaum. If

yoll will be in touch with the staff here, I would like to find out more about the impact on the dealers and jobbers, of what is going on here. I think you were starting on it. We don't have the time today to really go into that further. If you will be in touch with Dr. Ben Cooper of the staff, then we can follow up.

[Subsequent to the hearing the committee received the following statement from NOJC:]

NATIONAL OIL JOBBERS COUNCIL,

Washington, D.C., December 18, 1978. Hon. HENRY M. JACKSON, Chairman, Energy and Natural Resourccs Committee, U.S. Senate, Washington, D.C.

DEAR SENATOR JACKSON : I wish to commend your continued concern with the problems of independent petroleum jobbers and to specifically respond to your request for information made at the Energy Committee's recent gasoline pricing and supply hearing on the impact of the price and allocation regulations and the current marketing changes on the independent jobber. The National Oil Jobbers Council, the national trade association for those jobbers, is pleased to provide that information in the attached statement which hopefully can be included as part of the hearing record.

NOJC had originally requested the opportunity to testify at the hearing but was advised by committee staff that the hearings would be restricted to witnesses from Shell, DOE and EPA. We did not protest that determination based on the committee's desire to complete the hearing as expeditiously as possible and because we could not provide any direct information on supply, prices or the impact of the refiner regulations on the availability of unleaded gasoline refining capacity.

I was disappointed, however, to note that a dealer, representing one hundred other dealers from one state, was permitted to testify at the last minute. If the committee's interests included assessing the impact of the current problems on independent marketers, then representatives of broader segments such as the National Congress of Petroleum Retailers and NOJC might well have been included.

As one who has watched your work on issues like the Marketing Practices Act, which are critical to the survival of independent marketers, I know that your concern with the problems of jobbers and dealers is very real. Your leadership has been an inspiration to jobbers for a long time and your presentation to our Board of Directors last July won you many new supporters.

I hope the attached statement adequately addresses your concern with marketers' problems and hope that in the future we will have the opportunity to present such statements in person to the full committee. Best wishes for the holidays! Respectfully,

WILLIAM G. LYDEN,

President

38-972 0 - 79 -7

PREPARED STATEMENT OF WILLIAM G. LYDEN, PRESIDENT, NATIONAL

OIL JOBBERS COUNCIL

PREFACE

The National Oil Jobbers Council is a federation of 42 state and regional trade associations representing thousands of independent small business petroleum marketers. Members include gasoline and diesel fuel wholesalers, commissioned distributors of gasoline, gasoline reseller-retailers and a large number of retail fuel oil dealers. Members also wholesale or retail many other petroleum products, including kerosene, LP gas, aviation fuels and motor oils as well as residual fuel oil. Together our members market approximately 25 percent of the gasoline and 75 percent of the home heating oils sold in America under either their own private brand or the trademark of their supplier.

Good morning, Jr. Chairman, and thank you for granting me the opportunity to appear before this Subcommittee today. My name is William G. Lyden. I am the president of the Lyden Oil Company of Youngstown, Ohio. I am accompanied today by Robert Bassman, Counsel to the National Oil Jobbers Council. My company, founded by my father in 1919, is a distributor of gasoline, heating oils and other petroleum products. My principal supplier is the Standard Oil Company of Indiana (Amoco). I am testifying before you today as a spokesman for the thousands of small business independent marketers who, through its federated associations, make up NOJC.

This Subcommittee and its distinguished Chairman have held many hearings of this type. The first of these hearings, which led to the eventual passage of the Emergency Petroleum Allocation Act, saw representatives of independent marketers pleading for your assistance in fairly apportioning the short supply of gasoline. This Committee responded to those urgent pleas. When the shortage ended, these same independents began pleading for removal of the no longer needed regulatory burden which grew with time to become, not a savior, but a grotesque, Rube Goldberg millstone around the necks of the very people it was promulgated to protect.

Simply stated, Mr. Chairman, the regulations do not work. Each "improvement” makes them even more complex and unworkable, and now, they threaten to cause the very shortages they were designed to alleviate.

Let me show you how this is so by attempting to answer some of the questions you raised in your invitation to testify. The answers to the other questions are attached as an appendix to my statement.

The central pressing questions relate to the demand and supply situation for unleaded gasoline, specifically high octane unleaded. The development of this demand-supply situation which I wish to relate to you clearly demonstrates the problem.

My own experience as an Amoco jobber allows me to demonstrate the demand for high octane unleaded, but before we get to the present problem, let us first examine how we got here.

Three government agencies have worked together, or more accurately not worked together, to cause our problem. EPA with its adoption of a catalytic convertor that requires high octane unleaded (though certified as running on low octane unleaded); DOT by adopting mileage standards which require engines so tuned to knock on low octane unleaded : and DOE which rewards inefficient refiners incapable of producing that unleaded with exception relief while refusing to grant return on investments for the necessary new (reformers) which would produce the unleaded we so badly need.

The result of all of this is : cars that demand higher octane unleaded than they are supposed to and inadequate supplies of this premium fuel.

My own experience as a fortunate marketer of what is the only (Mobil excepted) premium unleaded, clearly shows the demand for such a product."

Currently I sell more premium (26.5%) unleaded than regular unleaded (24.4%). Because I am lucky enough to sell unleaded premium, over half of my total gasoline sales result from unleaded.

That this high cost "new product" is in great demand can also be seen hy the fact that both Shell and my supplier Amoco, the only two suppliers of high octane unleaded, have become the first and second largest gasoline sellers in the United States.

i See attachment 1.

The current Shell "shortage” is another example of the regulations causing problems. Just last week DOE's Office of Hearings and Appeals granted Shell a two-month exception from its allocation obligations to meet an unleaded shortage. This shortage, Shell alleges, is caused by the regulations keeping Shell's price below free market competitive levels. Other refiners are lining up for similar exceptions from their respective allocation obligations, and if these are granted, other compensating adjustments will have to be made, further complicating an already incredibly complex situation.

The "tilt" was heralded in Shell's exception request as a way to allow Shell enough pricing flexibility to lessen demand. But the real solution is neither the tilt nor exceptions, it is deregulation.

As I said, answers to your specific questions are attached to my prepared statement. I would, of course, attempt to answer any other questions you may have.

[blocks in formation]

1. Please indicate who are the members of your association. See testimony preface.

2. Describe the historical patterns of purchases of gasoline by your membership (from major oil companies, independent refiners, etc.) and form of sales in the past three years.

VOJC's members purchase most of their gasoline from a single supply source and sell it under the brand of that refiner. Many members do, however, sell under private brands and these marketers often have two or more refiner-suppliers.

3. What has been the impact, if any, of the increasing market for unleaded gasoline upon your membership?

Those NOJC members who can obtain high octane unleaded have, on the whole, increased their market share while those members who cannot have had to endure stinging criticism of "watered down gasoline” from irate customers whose cars knock on the supposedly adequate octane gasoline. Market share suffers in these cases.

4. What percentage of your total membership's sales in 1977 and 1978 hare been : leaded regular, leaded premium, unleaded regular, unleaded premium for the past 3 years? NOJC maintains no such data but nationwide figures are:

2

[blocks in formation]

Since NOJC's members market mainly in rural areas and since new car sales are lower in these areas, NOJC members proportional unleaded sales are probably below these figures.

5. (a) What are the sources of unleaded gasoline by your membership?

(b) What is the impact of the recent unleaded gasoline shortage on your membership?

2 Lundberg Survey.

(c) Please identify any sources of such unleaded regular or premium gasoline from which your membership have had difficulty in obtaining your allocation.

(a) Refiner suppliers.

(b) Those affected have probably shortened hours, raised prices, any thing to lessen demand.

(c) Shell, Amoco.

6. What percentage of your members' total purchases in 1977 and 1978 of leaded and unleaded gasoline are imports?

We are aware of no unleaded imports and very little (-3%) leaded imports.

7. What has been the market share of sales by your membership for the past 5 years?

Industry figures vary, but NOJC's membership is estimated to sell between 25 and 35 percent of the gasoline consumed in the U.S. This figure appears to have remained fairly constant in the aggregate but many individual changes have taken place.

8. What additional costs per gallon, if any, are associated with marketing unleaded gasoline (other than purchase costs)?

112 cents (API estimate 2 cents) initial investments (tank trucks, pumps), extra handling costs, testing, washing tanks, fines, etc.

9. Please describe your views on recent DOE regulatory amendments concerning the gasoline "tilt" and passthrough of rent and vapor recovery costs.

NOJC has no position on the "tilt.” The rent and vapor recovery passthrough ideas are commendable, but since market pressures have prevented most marketers from getting anywhere near their legals ceilings, the "help" is really no help at all.

10. Shell Oil has asked for an exception to DOE's allocation regulations to update its base period to 1977. How will such a change affect your members and the marketplace generally.

See attachment 3 of testimony.

ATTACHMENT 3

OFFICE OF HEARINGS AND APPEALS

U.S. DEPARTMENT OF ENERGY

[Case No. DEE-2014]

In the Matter of SHELL OIL COMPANY

Application for Exception

COMMENTS OF THE NATIONAL OIL JOBBERS COUNCIL OF THE REQUEST FOR EXCEPTION

FROM ALLOCATION OBLIGATIONS (10 C.F.R. 211)

The National Oil Jobbers Council is a federation of 43 state and regional trade associations representing thousands of independent small business petroleum marketers. Members include gasoline and diesel fuel wholesalers, commissioned distributors of gasoline, gasoline reseller-retailers and a large number of retail fuel oil dealers. Members also wholesale or retail many other petroleum products. including kerosene, LP gas, aviation fuels, and motor oils as well as residual fuel oil. Together our members markets approximately 25 percent of the gasoline and 75 percent of the home heating oils sold in America under either their own private brand or the trademark of their supplier.

NOJC's members include almost all of the 800 Shell jobbers in the United States. These jobbers and the thousands of independent dealers they supply are naturally most concerned with the exception application before you today.

Additionally, NOJC's entire membership is nervously awaiting the outcome of this hearing because of its probable impact on the very lifeblood of their businesses, their supply.

We at NOJC have heard, and you at OHA will hear today, various views on the merits of Shell's exception request. Independent marketers of Shell and other refiners' gasoline, both dealers and jobbers, will support or attack the Shell request as their individual experiences and situations dictate. NOJC, which represents inost of these viewpoints, has had to examine the many pros and cons of this matter.

« 이전계속 »