Photo: sarowen, Creative Commons, Flickr
ConocoPhillips (COP) has joined the ranks of Big Oil companies getting out of the retail gasoline business. The Houston Chronicle reports that COP is looking for a business model that is more sustainable:
ConocoPhillips will act solely as a wholesale fuel supplier to the sites, as well as to other stores that are not part of the deal, said Terry Hunt, a spokeswoman for the Houston-based oil company. She called the arrangement a ‘more sustainable business model.’
The gas station retail model just isn’t cutting it. With tight operating margins and other issues, Big Oil companies are recognizing the need for more upstream income, rather than their traditional reliance on furthest of downstream income. Indeed, COP’s move follows Exxon Mobil’s (XOM) decision earlier this year to sell more than 2,000 of its gas stations. BP (BP) has also gotten out of the business of selling gas to the public.
In the case of ConocPhillips, the sale of its gas stations came Wednesday, just ahead of Thursday’s opening ceremony for a joint venture with LUKOIL in the Nenets Autonomous District. COP is hoping that the Yuzhno Khylchuyu (YK) field will give the company an increase of upstream profitability: The oil is of higher quality than that found in the Russian Urals. Indeed, with the dead weight of the gas stations gone, COP has a reasonably good chance of continuing to make good profits.
Disclosure: I do not own any Big Oil stock.
Photo: sarowen, Creative Commons, Flickr