BP Gulf Spill: Why the Boycott Isn't Working [UPDATE]

(MoneyWatch)  Shrimpers, hotel owners and famous New Orleans chef Susan Spicer have all demanded BP pay for damages related to the Gulf oil spill disaster. Now a new group of business owners are gunning for BP: Owners of BP-branded gas stations, who have seen sales drop as much as 40 percent since the Gulf oil spill began April 20. In this case, their solution is as contrived as the boycott that led to their problems in the first place.

Their problem: A nationwide boycott of BP ramped up in May after the finger-like trails of oil that streamed from the BP's offshore well covered pelicans and other wildlife and reached sensitive marshlands and beaches. Now 68 days since oil began spewing from the well, the boycott has hit its stride. Protests outside BP gas stations have popped up; the Facebook page Boycott BP has 723,000 followers and counting; and Lady Gaga, Rise Against, and Creed are among a growing list of rock bands to sign onto a "BP Free" initiative started by heavy metal group KORN.

Problem is, the boycott isn't hurting BP. The oil company owns only about 200 of the more than 11,000 gas stations bearing the BP, Arco and Amoco names. The rest are owned by independent business folks who have contracts with BP to buy its gas and use the logo. That's it. And like every other gas station in the U.S., their real money comes from convenience store items like coffee, doughnuts and frozen pizzas, not on the gas. Which means BP is still making its money, and the people who own these stations -- and sign contracts up to 10 years -- are locked into a money loser.

Their solution: Station owners and gas distributors have asked BP to cut the cost of the gas they buy and to help pay for advertising to attract customers.

UPDATE: BP has agreed to support gas station owners through direct payments, reductions in credit cards fees and help with more national advertising. The total package is estimated between $50 million and $70 million.

The problem with the solution: It's unlikely that advertising will bring back customers. A price cut would have to be significant to coax drivers to buy BP-branded gas. BP, which is expected to make a decision in the coming weeks, will likely offer a symbolic price cut. Certainly, nothing that would make up for a 40 percent drop in revenue. In short, as long as the anger over the Gulf oil spill continues, so will the drop in sales at BP gas stations.

The boycott and reaction to it, points to a much larger problem in the United States. We may consume upwards of 19.4 million barrels of petroleum products every day -- more than any other country in the world -- , but we know next to nothing about where it comes from or how it's distributed to us. Take, for instance, the BP boycott. Folks may feel empowered by choosing Ted's Country Store instead of the BP gas station down the street, but chances are both sell gas produced, refined and transported by BP. Major oil companies like BP, Exxon (XOM), ConocoPhillips (COP), Shell (RDS) and Chevron (CVX) earn billions in profits each year producing crude and then either refining it themselves and selling it, or selling it to a refiner.

The boycott is symbolic. If folks really wanted to stick it to the oil companies they have to actually change their habits in the long-term; and live with the effects of an economy that switches from fossil fuels to alternative, including job losses in certain industries.

Photo from Flickr user Rustyboxcars, CC 2.0 For complete coverage, see: All Things BNET on BP's Gulf of Mexico Spill Related:

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