Arco low prices to stay, says new owner

The 199 Arco stations in Washington still are decked out in their familiar red and blue. But these are the flagship colors of an oil company that no longer exists, subsumed in a merger that has reshaped the ownership of West Coast crude supplies and shaken up retail-gasoline markets.

The merger, completed earlier this month, folded Arco's Los Angeles-based parent, Atlantic Richfield, into London-based BP Amoco. The takeover comes at an uneasy time for Washington motorists, who now face some of the highest pump prices in history and new ownership of a company that's often been a low-cost leader among the major retailers.

BP Amoco officials are trying to reassure consumers that they value the Arco brand's reputation, and won't mess with pricing. As of April 21, Arco gas prices in Seattle often averaged 8 cents a gallon below citywide averages, according to a company price survey.

One way Arco tries to keep prices low is by not accepting credit cards at most outlets. BP Amoco plans to continue that policy, at least in the short term.

But there could be changes ahead. BP Amoco has grown dramatically during the last three years, swallowing up Amoco Oil, the lubricant company Burmah Castrol and Arco.

Some motorists remain wary of the BP brand, and would have liked to see Arco remain an independent force in the marketplace.

"I'm kind of against these big corporate mergers," said Mark Cooper, a motorist stopping to fill up his tank at an Arco station south of Tacoma. "I think it hurts competition."

BP holdings include an ownership stake in Alaska's North Slope oil fields, and that stake would have expanded under the initial merger proposal announced last year. Once the merger was finalized, BP Amoco would have controlled 75 percent of the North Slope crude. This crude is the lifeblood of five major refineries in Washington.

Federal Trade Commission and state regulators feared that BP, if it gained control of 75 percent of the North Slope crude, would use that market power to muscle up the price of oil sold to refiners. The higher-priced crude could then result in even higher prices at the pumps.

In February, regulators filed lawsuits in U.S. District Court to block the merger. These lawsuits helped prod Arco, on March 15, to sell its stake in the North Slope crude to Phillips Petroleum of Bartlesville, Okla. Regulators hope that Phillips - as it vies with BP Amoco for West Coast refinery sales - will help keep down the West Coast crude prices.

"Because of these concessions, we now feel confident that refiners in Washington will continue to have a competitive source of supply," said Washington Attorney General Christine Gregoire in a statement released earlier this month.

"We believe this is great news for Washington gasoline consumers."

But Washington, in recent years, hasn't been a good place to bargain-hunt for gas. Washington pump prices - like those in Oregon and California - have consistently been more than the national average. And that split has widened in recent weeks.

Nationally, in mid-March, the average price of self-serve regular climbed to more than $1.54 per gallon, the highest ever recorded in surveys by the American Automobile Association. In the Seattle area, the average was more than $1.63 per gallon - almost 6 per cent above the national level.

By mid-April, prices nationally eased to an average of close to $1.50 per gallon. But in Seattle, gas prices had actually gone up as of April 21, averaging more than $1.69 per gallon, according to the Lundberg Survey, an industry survey group.

No new surveys are available since that time, but calls to several stations indicate they've lowered prices by as much as 8 cents per gallon during the past week.

Oil-company officials say the higher West Coast prices reflected tighter gasoline supplies on the West Coast, where demand is strong and refinery capacity is limited.

But oil-company critics say the prices reflect the majors' control over retail markets.

"They do it because they can," said Tim Hamilton, a representative of the Automotive United Trades Organization, a group formed by independent oil distributors.

The announcement that BP is coming into the Washington market could be confusing to consumers, particularly since the BP brand was a big presence in the state until recently.

But those BP retail outlets actually are owned by Tosco Corp. of Stamford, Conn., which held the rights to market the BP brand of gas. Last year, BP and Tosco decided to end the marketing agreement in a move that underscores the tangled nature of retail branding.

Tosco is now taking down BP's green and gold signs and putting up the orange and blue of Union 76, a brand Tosco acquired in the late '90s.

BP also has had a second - much smaller - brand presence in Washington state due to the 1998 acquisition of Amoco Oil. In the Tri-Cities areas, 11 service stations market the Amoco brand. Unlike most Washington gasoline that comes from West Coast refineries, this gas is piped up from an Amoco refinery in Utah and then delivered by Tri-Cities oil jobber Al Pogue.

Pogue used to be an independent jobber who marketed his own brand of gas. But as the industry consolidated and margins tightened, it became very difficult for independents to survive, he said. So five years ago he became an Amoco jobber. Since Amoco is a subsidiary of BP, Pogue figures his Amoco brand will eventually become a BP brand, just like the Arco stations that now form part of his competition.

"The Amoco label - as far as a brand out on the street - is going to go away and we'll have some sort of BP logo," Pogue said.