Effect may be profound for Vegas consumers, independent operators

David Strow

Monday, Oct. 16, 2000 | 11:29 a.m.

If it occurs, the merger of Chevron Corp. and Texaco Inc. would have a profound impact on the Las Vegas gasoline retail market.

Chevron already operates more than 55 stores in the Las Vegas Valley. Texaco would add at least 30 more.

That kind of market share makes it likely that many Las Vegas stations, primarily those owned by Texaco, would be sold. And that, Nevada observers say, raises concerns on two fronts -- concerns over the prices consumers will pay, and the fate of the independent business owners that lease Chevron and Texaco stations.

At this point, AAA Nevada is taking a wait-and-see attitude.

"Mergers can be just one factor in either an increase or drop in (gasoline) prices," said Lisa Foster, spokeswoman for AAA Nevada. "(Oil companies) have said in the long run that the key to lower retail prices is lower costs (through mergers).

"We still don't know what the impact will be on motorists, but our concern is the price of gas at the pump. We don't know how (the merger) will effect that bottom line yet."

But the Nevada Petroleum Marketers Association, a trade organization representing many of the state's independent gasoline retailers, isn't pleased about the prospects for its members. The group isn't ruling out the possibility of asking the Nevada attorney general's office to take action against the merger if officials feel it will harm consumers or independent store operators.

"There are numerous examples in Las Vegas where you have a Chevron on one corner and a Texaco on the next corner," said Peter Krueger, state executive for the Nevada Petroleum Marketers Association. "(The merged company) is not going to continue that. So what happens to the person that operates that station?"

Though some stations are operated directly by oil companies, many more -- particularly in the Texaco chain -- are leased from the company by an independent operator. This is particularly the case in Nevada, where until recently gasoline companies were forbidden from owning and operating stations.

"(The lessee) has the right of first refusal, but in a lot of cases, they won't have the money to buy the buildings," Krueger said. "Then the major oil company can sell it to anyone they want.

"If the lessee-dealer can't come up with the capital, he's out, and the chances of the new owner putting the same lessee-dealer in that station are pretty remote."

In many parts of Las Vegas, Krueger believes there will be interested buyers for Texaco and Chevron stations. But in areas where sales aren't growing at all, stations could be at risk, he said.

"Major oil companies are looking for tons of (sales)," Krueger said. "If (sales) are not growing, then that station could be at risk.

"In the Las Vegas market, this could form the opportunity to bring some new players into the marketplace, and that would be good. But this is of great concern to Texaco and Chevron dealers because of the uncertainty now."

Tim Hay, Nevada's consumer protection advocate, expressed concerns over the merger from the standpoint of retail competition and the supply of gasoline to the state from California.

"Both Texaco and Chevron have substantial refinement capacity in California," Hay said. "With gasoline supplies being very tight, we'd want to address any impact on the refinery business. For a free market to work well, you need an adequate number of competitors out there. We'll be involved from the standpoint of Nevada consumers ... and communicate our concerns to the Federal Trade Commission and Department of Justice as appropriate."