Small gas jobbers like J.E. Meintzer & Sons are a scrappy bunch. How else could they cope with multibillion-dollar competitors or the Persian Gulf crisis?


October 15, 1990|By Ellen L. James | Ellen L. James,Sun Staff Correspondent

Easton - Peter Horrigan sits hunched over his IBM, absorbed in columns of white numbers against the kelly green screen. The numbers, reflecting gas prices on the New York Mercantile Exchange, change with dizzying frequency and the aggravation shows on his face.

Every now and then, he shuts the terminal off because it's driving him crazy.

But he can never escape the impact of those little white numbers, which determine whether his company will prosper or suffer.

Mr. Horrigan's company, J. E. Meintzer & Sons of Easton, is one of a diminishing breed of gasoline middlemen -- known as jobbers -- being whipsawed by pricing changes and other problems in the aftermath of the Persian Gulf crisis.

Increasingly, independent distributors such as J. E. Meintzer, who buy gas on the wholesale market and sell it to independent stations, feel at the mercy of Big Oil and other forces beyond their control.

The jobbers, which often own or lease independent gas stations, are troubled by the pricing practices of the major oil companies, who serve as direct suppliers to an increasingly large number of competitors, in the form of major-owned stations.

They're confronted with steep expenses for environmental insurance and environmental equipment such as underground storage tanks -- costs that the major oil companies are far better able to bear. And they're buffeted by rapid global price changes, as reflected on the Merc.

For small companies such as J. E. Meintzer, which has just 28 employees, such pressures lead to a precarious existence. Especially in an industry that measures profit margins in fractions of a cent.

"How do you run a business when the lifeblood of your business fluctuates 8 cents a gallon a day and your profit margins are well below a penny?" asks Mr. Horrigan, 49, a co-owner of J. E. Meintzer and the company's head of supply and distribution.

The impact of the frenetic gasoline pricing situation spreads far beyond the jobbers -- touching the thousands of Maryland residents who use home heating oil.

Most of Maryland's jobbers not only supply gasoline to service stations and various business customers, but also provide home heating oil to retail customers.

Jobbers say Maryland's consumers should brace for price shocks as the winter heating season sets in. While they don't admit it publicly, some suggest they'll take unusually heavy profits on home heating oil deliveries this winter to make up for losses suffered on the sale of gasoline.

Over the long term, Maryland consumers may have more at stake than extra pennies per gallon on this winter's heating oil deliveries, however.

The recent pricing chaos -- which has forced many jobbers to narrow profit margins or sell below cost -- could knock some jobbers out of business and also result in the closing of independent stations.

A winnowing of independent stations occurred during the 1970s, triggered first by the Arab oil embargo of 1973 and later by the Iranian oil embargo in 1979, says Art Price, who heads the fuel tax division of the Maryland comptroller's office. The trend, which continued through the 1980s, could greatly accelerate during the current oil crisis, he predicts.

Fewer independent gas stations -- supplied by fewer and weaker jobbers -- could hurt consumers in the long run, Mr. Price fears.

If some independent stations go out of business, the remaining dealers could charge higher prices at the pump. Mr. Price is also concerned that fewer independent stations could mean reduced access to gasoline in rural areas of Maryland, where independents now predominate.

The vulnerability of Maryland's independent gasoline distributors became especially apparent following Iraq's Aug. 2 invasion of Kuwait. From then through virtually the end of September, the pricing practices of major oil companies put the jobbers in an unusually costly position.

On the day of the Iraqi invasion, J. E. Meintzer executives were in the process of closing their Pasadena offices and moving to the Eastern Shore in an effort to consolidate the company's operations. They were refurbishing the Easton office when word came of the Iraqi invasion.

The bay window of Mr. Horrigan's new office was being replaced and a gaping hole where the new window was being installed stood open for hours. Heat and flies filtered through the room, with its big mahogany desk and maroon leather chairs.

"There I was, in an office that looked like a rat hole, black flies all over me, the phone ringing every two minutes. I knew right away that we were in deep trouble -- that the Merc would skyrocket," Mr. Horrigan says.

The days following the invasion proved as nerve-racking as Mr. Horrigan had imagined. Prices soared.

And expectations on gas price trends, as communicated by the Mercantile Exchange, swiftly translated into changes in the "rack price" of gas by those who supply the jobbers by the tanker load, generally from terminals at Curtis Bay in Baltimore.

That triggered a daily scramble by Maryland distributors.

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