Verona LukOil Participates in Protest
Franchise owner Harjinder Kehal joins more than 50 other gas station owners in New Jersey and Pennsylvania Wednesday against suppliers.
Harjinder Kehal, owner of the LukOil gas station at 655 Bloomfield Ave. in Verona, has seen it all in his 15 years as gasoline franchise dealer in Verona.
That is, until this morning.
At around 10:30 today, Kehal joined more than 50 other LukOil's around the state setting the price of gasoline on his pumps at more than $8 a gallon to protest the extra 5 to 20 cents LukOil suppliers charge franchisees.
At the Getty station on Route 23 in Kinnelon Wednesday, owner Ameer Krass said he did not mind that he lost customers.
In fact, he was encouraged by the more than 4,000 gallons of gasoline he did not sell and more than $12,000 in lost revenue from one day of declining sales. While a business owner would normally consider this a bad day, the protest of 57 gas stations in New Jersey and Pennsylvania against Lukoil was actually his own idea.
"He approached me several months ago," said Sal Risalvato, executive director of the New Jersey Gasoline, Convenience Store and Automotive Association. "[The gas station owners] were willing to take some drastic action."
Krass said his frustration began in 2004, shortly after Lukoil bought out the local Exxon Mobil brand stations. Krass' Getty station is supplied by Lukoil, which he said has a monopoly on gas supplying for the nearby area, including two Lukoil brand stations within a close proximity of Getty on Route 23.
"Due to their competitive pricing system, over the last several years they have been pricing us out of the market," Krass said.
When the supplier charges more, the retailer has to pay more for the gas and, as a result, must charge customers more. For instance, for 500,000 gallons Krass said he typically sells in a month, he barely makes $500 profit. Since 2004, Krass said he has seen an 80 percent drop in sales because he believes customers are seeking cheaper gas elsewhere.
"As a consumer, I wouldn't go to Lukoil because the prices are simpy unfair to the consumer," he said.
As for Kehal, he’s decided to close his Verona station for good in the near future.
“When I pulled up I thought they had made a mistake and put the wrong numbers up,” said Verona resident Judy Reilly. “I'm going to the other station.”
Since LukOil sets the prices, Kehal is at the company's mercy to charge whatever they set for gasoline, which he says is usually about 20 cents higher than their competitors.
Kehal bought the station 15 years ago, back when it was Mobil, and used to sell about 120,000 gallons of gas every month. Today, as a LukOil franchisee, he sells roughly 50,000 gallons per month.
“If I want to match the prices of other stations, then I make six cents on every gallon of regular gasoline,” said Kehal. “I would only make $3,000 on 50,000 gallons of gas. That's not even enough to pay my employees.”
Kehal owns a total of six franchisess throughout the state and has already lost $200,000 combined, $50,000 more than he originally paid for his Mobil franchise. That, he explains, is why he will be closing down his Verona location for good.
“I can't do it anymore,” he said. “I am losing $5,000 a month at this station alone.”
Kehal has seen many changes in ownership and mergers over the years including Mobil, Exxon-Mobil, Tosco, which then became Tosco-Phillips before being bought out by LukOil. He and many other franchise dealers protested the company from the start.
“When LukOil came in five years ago, they said they would provide us with refined gasoline from Russia, which would give us a better price, but that never happened,” he added.
Then about three years ago, he said, they began charging him 10 percent more on his rent every year on top of his $2,000 a month real estate tax.
Since he is already losing money Kehal could only raise the prices in protest at one other location.
All day, he and his employees have been turning away customers, explaining the situation and handing them a flier. Of course they are welcome to pay the $8.89 per gallon, but none have.
Customers were pulling away from the pumps saying such phrases as “It's ridiculous!” or “It's outrageous!”
Some were slightly more sympathetic.
“It's crazy,” said one customer looking to fill up his truck. “You gotta do what you gotta do, but I'm going to get gas up the road.”
Kehal and his wife have been working about 60 to 80 hours a week running their stations but their Verona LukOil just isn't pulling its weight and he will be closing down at the end of the month.
“I feel bad for Danny,” said Kehal referring to the mechanic at his location, who will also have to close at the end of the month. “He has been here seven years and everyone knows him.”
“We just hope they (LukOil) will treat us a little better after this,” he added.
— Tri-Boro Patch Local Editor Ariana Cohn-Sheehan contributed to this report.