Exxon (NYSE: XOM) says it cannot make money in the retail gas business. So it is getting out. That raises the question of whether anyone in that part of the industry can make a profit. If not, where will consumers buy gas?
According to The Wall Street Journal, "The retail gasoline business "continues to be a very challenging market with reduced margins, and there is significant competitor growth," says Exxon spokeswoman Premlata Nair." Exxon will sell many of its stations to local owners. Why they will be able to do better than the oil giant is a mystery.
The reason Exxon is making the move is that gas prices have been rising more slowly than oil prices. The inability to move up what the consumer pays kills the stations' margins.
There may be another reason for the move, one that Exxon does not want to talk about. To get the gas station business financially healthy again may require a sharp increase in prices at the pump. Per gallon costs could spike up toward $5. Exxon, already criticized for its huge profits, does not need to add to that the public image of hurting the American consumer.
Why get beat up over a few bucks?
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
6-13-2008 @ 10:06AM
speculator said...
With the politics of oil now, it cost exxon more to run the gas stations than the money they bring to the bottom line. Oil is just to crazy. I think theoil market is like Nasdaq in 1998, I will tell you why @
www.theinvestingspeculator.com
6-13-2008 @ 12:16PM
Paul Trombley said...
Exxon runs their business by close management.
Their are getting rid of their Stations, because no one will purchase gas from them any longer.
They are probably the most hated Corporation in Business; and rightly so. They have earned their status by living on greed. One of the problems is that our Government is not attending to the business of actually running this once great Nation.
What do you think Exxon/Mobil is doing with their huge profits over the last few years? ($40 Billion in net profits per quarter) Well, they have been investing in hedge markets, and purchasing futures in the petroleum markets. The price of gas has gone up not because we have been using more fuel, but because Exxon/Mobil is making huge purchases in the futures market.
6-13-2008 @ 12:43PM
Terry said...
Are we supposed to lament the loss of Exxon as a gasoline retailer. With their billions in quarterly profits, one would think they could weather the retail climate for gasoline better than the independents. I'm certain there aren't many station owners reporting billions as their quarterly profits. Getting out to avoid negative publicity.....truly a cowards way out of a bad situation. Why not stay and try to make the situation better for all consumers.