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Why BP and other oil giants are boycott-proof

Even as calls came from the likes of Lady Gaga and teen pop star Justin Bieber for boycotts of BP gas stations over the gulf oil spill, we quickly learned that the oil giant isn't harmed much by such protests.

It's the little guys, we discovered, that get hurt — our neighborhood gas station owner who has little to do with BP. In fact, the gas at the pump under the green and yellow BP sign may not come from BP oil at all.

And if it did contain BP oil, no one could really tell you — or at least they couldn't tell you how much of it was BP's, Exxon's or Shell's.

That leaves us with an array of other questions, including where in the world does the gas come from and what is the actual impact of boycotts against Big Oil?

I spoke with several industry folks and discovered quite a tangled case.

First, not only is the gas station owner the wrong target (as 95 percent of gas stations are independently owned, according to the American Petroleum Institute), but oil companies make most of their money before the oil even becomes gas.

The production and refining process — what the oil industry terms "upstream" — is where big money changes hands.

"We're talking billions and billions of dollars just in the cost of crude oil to purchase it," said Jim Smith, president of the Florida Petroleum Marketers and Convenience Store Association. "Retail is what's referred to as downstream. They don't care about profits downstream."

Basically, the production is the meat and potatoes (we spend about $1.5 billion a day on crude oil in the United States), while money from the contracts between retailers and the oil companies is just gravy. Retailers share just 16 percent out of every dollar spent on gas with marketers and refiners.

Refineries mix crude oil from all over the place — BP, Shell, Exxon, the Middle East. By the time the oil becomes gas, it's a mixture of every brand of oil fed into the refinery and the storage terminals.

"Nobody can ever trace where the barrel (from BP) is, it is so comingled," said Rayola Dewar, senior economic adviser for the American Petroleum Institute.

The former crude oil leaves the refinery and is sold not just for gas, but for various other "downstream" uses, including petroleum jelly, cosmetics, asphalt and plastic.

"They don't waste any amount of a barrel of oil; it's all turned into something," Smith said.

So, folks ask, what makes a particular brand of gasoline BP as opposed to Exxon?

Well, it's the additives (what I like to affectionately call the recipe) that gets added to the gasoline just before it gets shipped to the retailer, stuff like ethanol.

The gas station owner contracts for the gas it uses to draw customers, but it's not the gasoline that makes the station much money.

"They're lucky to make a penny or two a gallon," Dewar said.

Out of every dollar consumers spend at the pump, 69 percent is for crude oil (already purchased from the oil companies), 16 is for refining and retailing and 15 is for taxes.

The local gas station actually makes most of its money off convenience store purchases and repair shop work, if there's a mechanic.

Even if I decided to take on Big Oil more directly in a protest, that isn't so simple, either. Individual investors make up about a quarter of ownership of BP. Most of "Big Oil" is owned — about 70 percent — by 55 million U.S. households through retirement savings. So a boycott would hurt our retirements.

You can divest your pension funds, 401(k), mutual funds and Individual Retirement Accounts of BP shares, but you could hurt someone else's retirement along the way.

So with the boycotts, "you're going after small-business men and women, and you're going after pensioners," Dewar said.

Here's a stark reality: No matter what we do (other than drastically reducing our use of oil), all available crude is going to get used somewhere.

"All of BP's fuel is going to get sold," Dewar said.

Ivan Penn can be reached at ipenn@sptimes.com or (727) 892-2332. Follow him on Twitter at www.twitter.com/Consumers_Edge and find the Consumer's Edge on Facebook.

Why BP and other oil giants are boycott-proof 07/17/10 [Last modified: Friday, July 16, 2010 11:08pm]
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