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Perhaps the majors should be taking down their signs completely?

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Published: June 15 2008 18:59 | Last updated: June 15 2008 18:59

You might think that with petrol in the US now costing more than $4 a gallon – $1 more than a year ago – it would be a great time to be selling the stuff. So why isExxonMobil choosing now to dispose of its 2,200 company-owned service stations?

The reason is: $4 petrol. When approaching a service station, the first thing a driver sees is an oil company logo above a petrol price that, these days, goes ever upwards – not exactly a marketing executive’s dream. It is all very well trying to explain that high petrol prices are set much further up the supply chain – distribution and marketing account for only about 6 per cent of the price in the US. But consumers care little for such nuances.

Washington is much the same. Politicians prefer to blame price gouging oil majors, rather than more complex factors involving geopolitics and inefficient consumption patterns. Exiting the customer-facing end of the business, therefore, is a shrewd political move.

Oil majors are not natural retailers. They make most of their money, and concentrate virtually all of their expertise, in the upstream; ie finding and pumping oil. Deutsche Bank estimates the stations Exxon is selling might be worth $2bn – chicken-feed for a company with a market capitalisation of $467bn. When petrol was cheaper, it was possible to eke out better margins by selling “premium” grades. But sales of these fuels have fallen sharply as drivers prioritise their wallets over engine performance.

Exxon’s brand will not disappear altogether, as most of its US service stations are already franchises anyway. But perhaps the majors should be taking down their signs completely. Their big issue, after all, is accessing and managing big upstream and refining projects. This is where they make their profits – and can earn goodwill by actually producing the raw energy the world needs. Attaching their name to the end product looks increasingly superfluous, if not counterproductive.

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