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Politics

Amid political dustup, 7-Eleven drops Citgo

The convenience store chain says many factors figured in the decision to ditch the Venezuela-owned supplier.

By CHRISTINA REXRODE and DAVID ADAMS
Published September 28, 2006

Convenience store giant 7-Eleven Inc. will end its 20-year relationship with Venezuela-owned Citgo Petroleum Corp. this Saturday and move forward with plans to offer its own brand of gasoline.

The decision has been a long time in coming. But Venezuela President Hugo Chavez's recent and high-profile insults aimed at President Bush have embroiled what would have been a mundane business transaction in an international political flap and even prompted calls for a Citgo boycott by 7-Eleven customers.

Of 5,300 U.S. 7-Eleven stores, about 2,100 sell gasoline. There are about 540 7-Elevens in Florida, and more than 400 sell gasoline.

7-Eleven and industry experts on Wednesday downplayed talk of possible political motivations for the breakup.

"It's sort of a tempest in a teacup," said Margaret Chabris, a spokeswoman for 7-Eleven in Dallas. "This was all in the works long before Mr. Chavez made those comments last week."

Venezuela's leader called President Bush "the devil" in a speech to the United Nations General Assembly last week.

For consumers, the only noticeable change will be different signs on the stations, according to 7-Eleven.

But don't expect the rebranding to take place overnight. 7-Eleven accepted its last delivery of Citgo fuel this week, Chabris said, but will keep the Citgo logo on the stations' gasoline canopies and dispensers until they can be replaced. The bulk of the signs will be changed by the end of 2007.

7-Eleven said it will buy fuel from several distributors, including Tower Energy Group of Torrance, Calif., Sinclair Oil of Salt Lake City, and Frontier Oil Corp. of Houston. The new contracts run through 2010.

Citgo will put its additional fuel into the spot market, which could contribute to the downward trend in gas prices, said Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association.

But he and other experts said that if the end of the 7-Eleven-Citgo relationship has any effect on the price of gasoline, it will be negligible.

"7-Eleven is a smart buyer and they'll get a competitive price" from their new suppliers, Tom Kloza of the Oil Price Information Service wrote in an e-mail to the St. Petersburg Times. He said that Citgo bid on retaining the Florida portion of its 7-Eleven business but was bested by Tower Energy.

7-Eleven was taken private in 2005 by its Japanese parent company, Seven & I Holdings Co. Citgo Petroleum Corp. is a Houston-based subsidiary of Venezuela's state-run oil company.

7-Eleven acknowledged the political timing of dumping Citgo.

"Regardless of politics, we sympathize with many Americans' concern over derogatory comments about our country and its leadership recently made by Venezuela's president," 7-Eleven said in a statement.

7-Eleven's decision to sell its own brand was based on many factors, including Citgo's decision this summer to stop supplying stations in parts of Texas and other states to focus on retailers closer to its refineries in Corpus Christi, Texas; Lake Charles, La.; and Lemont, Ill., spokeswoman Chabris said.

In some parts of the country, Citgo has struggled to fill orders with its own product, said James Williams, an energy data analyst at WTRG Economics.

To meet service contracts at all 13,100 of the Citgo-branded stations across the country, Citgo had to buy 130,000 barrels a day from third parties - a less profitable business model than selling gasoline directly from its refineries.

Smith, president of the Florida Petroleum Marketers group, said that about one-third of Citgo-branded locations in the state are 7-Eleven stores.

In spite of the 7-Eleven and Citgo breakup, Smith said the United States and Venezuela will be joined at the hip for years to come, brought together by the United States' need for oil and Venezuela's need for buyers.

Another challenge for Citgo, Williams said, will be figuring out what to do with all those signs.

"If you've ever wanted a Citgo sign," he said, "this is a good time to get one." - Information from the Associated Press was used in this report.

[Last modified September 28, 2006, 06:01:54]