Northeast Lukoil Franchisees Publicize $9 Gas in Protest

Sept. 12, 2012— -- Drivers in New Jersey and Pennsylvania may be in for a shock if they pull into a Lukoil gas station.

About 57 franchise owners are protesting on Wednesday against the price of gas charged by Lukoil North America, a subsidiary of the Russian corporation, OAO Lukoil. The owners have posted gas prices over $8 at their stations to draw attention to what they claim are the high prices charged to them that they must pass on to consumers.

"We are doing this because we are dying," said Khaled Kezbari, owner of three Lukoil gas stations in New Jersey. "Lukoil is charging us costs higher than the retail market. How can you compete? You cannot compete in the market like that."

Outside Kezbari's gas station in Mount Laurel, N.J., the price of gas is posted as $9.99 a gallon.

However, Kezbari, 46, said the gas station owners are not charging customers those high costs. They are only posting the prices for 24 hours in protest of the franchisees' high costs.

"It would be ridiculous if they charged that amount. We are trying to send a message to Lukoil so they know what our feelings are," he said.

Kezbari said he is charging consumers $3.79 a gallon for regular gas. He said franchisees have no choice but to pass on its higher costs to consumers. That has led to lower sales.

He said his business previously used to pump 6,000 gallons a day on average but now pumps 3,000 gallons a day.

State average gas prices in New Jersey are $3.79, according to Gasbuddy.com. But many dealers charge 10 to 20 cents a gallon less for regular, depending on where they get their gas. There are also discounts for those who pay cash.

The national average is $3.85 a gallon, according to the Department of Energy's weekly gas report.

The taxes, fees, rent and labor costs in New Jersey, which ban gas stations from allowing customers to operate the pumps, have also affected his bottom line.

"If I am paying 3 cents on the dollar for credit card fees, how can I survive?" he said.

Kezbari said Lukoil has slowly passed on additional costs to franchisees, including real estate taxes and building up-keep costs, so the company can make additional profit.

A spokesman for Lukoil North America provided a statement to ABC News, saying the company values "our network of independent dealers."

"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 NJGCA's efforts appear aimed at zone pricing, a commercially reasonable practice used by gasoline marketers for many years, which is fully compliant with New Jersey statutes governing the sale of motor fuel."

Zone pricing is the practice of gasoline suppliers charging more or less to stations based on their zip codes or other market factors.

Sal Risalvato, executive director of New Jersey Gasoline, C-Store, Automotive Association (NJGCA), the trade group organizing the protest, said the owners agreed to post a high price of their choice on their signs.

"Everybody said we're going to charge something that would be offensive and send a message to Lukoil," Risalvato said.

He said this is the first time the trade group has protested in this manner, though they have been in discussions with Lukoil for the past few years.

Risalvato, who owned a gasoline service station for 23 years in New Jersey, said he is also trying to reach Lukoil dealers in New York and Connecticut.

Kezbari said his customers have so far shown their support of the franchisees. He and some of the other owners are providing a phone number to customers to the Lukoil main office.

"Regular customers say they understand and, 'We're going to call that number,'" he said.