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Gas retailers deny big profit

As the public fumes over oil and gasoline industry

profits, gasoline retailers say they make pennies per gallon and that a

practice called zone pricing sometimes squeezes their profit to nothing.

Under zone pricing, oil companies charge dealers different prices based on

how competitive the companies deem each location. Station owners say oil

companies do not disclose their criteria for the zones, a point of contention

at a news conference in Hauppauge yesterday.

"Everybody thinks we're making money, while we're working on 6 cents a

gallon," said Curt Reichert, owner of an Exxon station in Huntington that was

charging $3.23 a gallon yesterday for regular unleaded. "Little do they know

that this is one of the worst times in the 27 years I've been here."

Reichert leases the station's property from Cumberland Farms, which

supplies Exxon gas at a zone price plus an 8-cent royalty for use of Exxon's

name, which Reichert called "a double punishment." Last year at this time, he

said, he was making 10 cents a gallon and selling four times the volume. The

property is at the edge of a zone, Reichert said, so a nearby station sometimes

charges 5 cents less, further hurting his business.

Reached by telephone before the news conference, state attorney general

candidate Jeanine Pirro said, "Zone pricing schemes are causing an

anti-competitive market," adding, "It seems these zones are simply created to

put some gas stations out of business."

Kevin Beyer agreed.

"[Zone pricing] is bad for business, and it's bad for consumers," said

Beyer, president of the Long Island Gasoline Retailers Association. "It's used

to keep prices up to make the most they can at every location. They'll never

tell you how they break up their zones."

Last week, Beyer, who operated a Sunoco station, said he became an

independent retailer. He can now choose among suppliers and shop for prices. He

said business has already improved because he has been able to lower his

prices and still make a profit of about 9 cents on a $3 gallon after taxes,

service fees and credit card fees.

But independents can be hurt, gas retailers said. If a major oil company

takes over a station nearby, it can set prices below-market rates because the

company is supplying gas to itself. This forces other stations, including

independents, to cut their profit or even sell at a loss, retailers said.

Rich Catania, who owns Advance Service Center, an independent station in

Huntington, said, "Many times, I'm being underpriced."

For several days last month, Catania said, he was selling gas for exactly

what it cost.

"There's something wrong here," he said. "The oil companies are making

billions in profit."

ExxonMobil Corp., which last week reported an $8.4-billion profit for the

first quarter, referred questions to the American Petroleum Institute, an

industry group.

"The basic aim is to be more competitive, and I think that helps improve

the situation for consumers," Ron Planting, an economist at API, said. "If they

had to sell it all at one price, it would tend to be a higher price."

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