$8 Gas: Local Lukoil Owner Joins Protest Against Company By Raising Prices
Ijmal Ali, owner of two Lukoil stations, says the company has been driving its franchisees out of business.
Drivers on Germantown Pike in Plymouth Meeting likely did a double take Wednesday, as they drove past big red Lukoil signs displaying a price even higher than usual: $8.09 a gallon.
The exorbitant figure was part of a protest that began amongst Lukoil owners in New Jersey and spread to dozens of stations across Pennsylvania, to bring attention to policies that franchisees say are driving them out of business.
Ijmal Ali, owner of the Lukoil at 434 Germantown Pike near the Mid-County Interchange and a second station at the intersection of Chemical Road, says that by the time he receives his gasoline from Lukoil, he's already out of the competition for customers. According to Ali, owners pay for the gasoline, and typically mark up prices 10-15 cents per gallon to make their profit.
"Sunoco is selling a gallon for $3.87 today, and my cost is $3.94," said Ali, computing that he'd have to sell the gasoline at a seven-cent loss just to match Sunoco. "But if I want to add my ten cents, then I'm way off the competition."
Ali says he bought the stations six years ago, along with a now-closed third location that sat directly across from the 434 Germantown station. Since then, Ali says Lukoil's oil production dipped from about five million barrels a day to two million, and he believes that the company is putting the pinch on its franchises to make up for the lost profits.
"They're basically squeezing money, and that's why you see Lukoils are closing left and right," said Ali. "Because at the end of the day, owners have to put the money from their pocket into the store."
One of the stores that closed was Ali's third, which he says went from selling 250,000 gallons a day as a Mobile before he purchased it, to about 30,000 a day when he closed it in 2008. It costs between $300,000 and $400,000 to buy a gas station, and Ali says he's still paying back loans on the closed location.
"It's actually cheaper -- I was losing $8,000 to $10,000 a month and my loan payment was $4,000. I was better off closing and just paying $4,000 from my pocket than taking a loss," Ali says.
But it doesn't stop there. Ali says Lukoil has been introducing new fees, such as a three-percent credit card transaction fee, and cutting costs, such as the elimination of an annual $3,000 stipend for maintenance of the store. Rent is also increasing by about ten percent a year.
Lukoil released a statement to ABC News Wednesday, and said that the fuel rates were a result of a legal "zone pricing" practice in which prices fluctuate based on zip code and other factors.
"We deeply regret that the NJGCA, a trade lobbyist, has apparently encouraged public misstatements and ill-conceived actions which harm consumers, rather than engage in constructive dialogue," the statement said. "The NJGCA's efforts appear aimed at zone pricing, a commercially reasonable practice used by gasoline marketers for many years, which is fully compliant with New Jersey statutes governing the sale of motor fuel."
However, Ali and other owners say that their private pleas to reverse the new burdens have fallen on deaf ears from the Russian-owned Lukoil, and hope that the protest will raise awareness. Signs placed on each pump warned potential customers of the high price and prompted them to call Lukoil at 856-722-6425 to voice their displeasure. Ali says it does help if customers use cash, in order to avoid the credit card fee. Prices will return to normal by Thursday.
He hopes something changes before he sees more friends, and possibly himself, out of business.
"We cannot even count how many owners went to our annual meetings and literally begged [for lower prices]," Ali said. "A lot of my family's friends lost their stations, and since it's a $300,000 investment for each station, you lose your life savings."