Exxon to exit U.S. retail gas business

NEW YORK Thu Jun 12, 2008 6:27pm EDT

A sign displays prices at a gas station in Washington July 27, 2006. REUTERS/Yuri Gripas

A sign displays prices at a gas station in Washington July 27, 2006.

Credit: Reuters/Yuri Gripas

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NEW YORK (Reuters) - Exxon Mobil Corp said on Thursday it is getting out of the retail gas business in the United States as sky-high crude oil prices squeeze margins.

Those branded service stations may be the most public aspect of Exxon's business, but they account for a small part of the company's profits.

Out of the roughly 12,000 Exxon Mobil branded stations in the United States, Exxon, the world's largest publicly-traded oil company, owns about 2,220.

Exxon plans to sell those service stations over several years. They include about 820 stations that it also operates.

The company will maintain the Exxon and Mobil brands, Exxon spokeswoman Prem Nair said.

Consumers will still be buying gasoline at stations that carry the Exxon and Mobil names, but they will not be owned by the company.

Service stations have struggled, even with $4-a-gallon plus gasoline prices because they have not been able to pass along to customers their additional costs from soaring crude oil.

According to federal data, gasoline prices are up about 31 percent over the last year, and oil prices have nearly doubled over the same period.

"We are in a very, very challenging market. Margins are reduced," said Nair. "We feel the best way for us to grow and compete is through our distributor network."

In the current environment, the company's profits from its retail unit are "somewhere close to a rounding error," said Mark Gilman, an analyst at the Benchmark Co.

He said Exxon was following competitors like Royal Dutch Shell and BP Plc in moving away from ownership of service stations.

"The retail gasoline business is a highly volatile and typically low return kind of business and thus the decision," Gilman said.

Exxon made more than $40 billion in 2007, most of which came from its oil and gas production around the world.

"I think the decision came that it's more of a headache than its worth," said Oppenheimer & Co analyst Fadel Gheit.

Although the company does not release profit margin figures for its retail arm, Gheit estimated the stations' margin was between 10 percent and 15 percent, about one-third its margin on crude oil production.

"The question is who is going to buy them, and how much are they going to pay for them," Gheit said.

(Additional reporting by Matt Daily; Editing by Toni Reinhold)

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