More than 50 Lukoil gas stations in New Jersey and Pennsylvania jacked up prices to more than $8 a gallon Wednesday to protest what they say are unfair pricing practices by Lukoil North America that leave them at a competitive disadvantage.
Dozens of Lukoil franchise owners also gathered to protest at a station in this central New Jersey town where the posted prices were an eye-popping $8.99 a gallon.
The owners and the New Jersey Gasoline, Convenience, Automotive Association said the protest was aimed at raising consumer awareness about the challenges facing Lukoil dealers and getting the company to respond to dealer grievances.
Station owners said Lukoil charges them more for gasoline than other companies charge their franchisees, forcing them to pass that increase onto consumers. It is not uncommon, they said, to see a competitor selling gas to the public for considerably less than what they're paying Lukoil per gallon.
"My price on invoices is what my competitors are selling on this street," said Khalid Zackria, owner of the South Plainfield station where the dealers assembled. "That's why it's hard for me to survive."
Sal Risalvato, executive director of the gas station association, said Lukoil charges 7 cents more per gallon than other companies and that owners might pay more on top of that depending on where their station is located.
Lukoil North America issued a statement defending its pricing practices, which it said comply with state law, and accused the gas station association of encouraging "public misstatements and ill-conceived actions."
Lukoil is Russia's second-largest oil producer. The first Lukoil-branded service stations in the U.S. opened in 2003 and today the company has more than 500 in the Northeast and Mid-Atlantic. Many of the franchisees entered into agreements with other companies that were bought by Lukoil.
The gas station association said the high prices were meant to get the attention of customers so they know the price pressures they are facing.
Gas stations taking part in the protest handed out fliers to customers explaining why they are struggling to keep their prices down and put up banners asking customers to contact Lukoil. One car pulled into the Lukoil station around the time of the protest; its driver circled the pumps and left.
Roger Verma, who co-owns four Lukoil stations and three Exxon stations, said he pays 18 to 20 cents more per gallon to buy gas from Lukoil than from Exxon.
"Me, as a consumer myself, won't go to Lukoil," Verma said. "How can I expect my customers to?"
Steve Hamparsumian, who owns a Lukoil in Bloomingdale, said his gas station was acquired by Lukoil about six years ago. Since then he said he has lost 50 percent of his business. He said his rent has tripled in that time.
"We have to pay considerably higher prices for anyone else," Hamparsumian said. "Not only are we selling less, our customers have to pay higher prices."
Risalvato said Lukoil and other companies engage in zone pricing, or varying prices based on the competition in local marketplaces. He said Lukoil is an "egregious offender" when it comes to zone pricing, further adding to the higher price it charges owners for gas.
Lukoil, in its statement, defended zone pricing, saying it's a "commercially reasonable practice" used by gasoline marketers for many years and fully compliant with state law.
"We deeply regret that the NJGCA, a trade lobbyist, has apparently encouraged public misstatements and ill-conceived actions which harm consumers, rather than engage in constructive dialogue," the company said.
Tom Kloza, chief analyst at the Oil Price Information Service, which has an office in central New Jersey, said Lukoil and its dealers have had a tenuous relationship over the past few years.
"There has been a history of discontent," he said.