Will BP rebate slow boycott?

The energy giant is giving distributors cash back for gasoline, but customers might not get a break.

By Kim Peterson Jun 30, 2010 2:12PM
Credit: (© Alastair Grant/AP)
Caption: BP stationPeople are boycotting BP (BP) filling stations across the country. But will the protest still hold when a station starts undercutting the rival down the road?

BP is giving its distributors money back for every gallon of gas they purchase this summer, The Associated Press reports. Distributors along the Gulf Coast will get 2 cents back per gallon, and those in the East and Midwest will get a penny back.

The rebate is meant to help distributors and, in many cases, station owners, some of whom say sales are down as much as 40% since the disastrous oil spill in the Gulf of Mexico began.

But there's no guarantee the savings will get passed along to customers, since BP has no control over the prices at the pump. Distributors, who in many cases also own stations, may keep the discount to themselves to stem their losses (BP fuel is also sold at Amoco and ARCO stations, though it's unclear whether ARCO owners will also get the break). Post continues after video:
Even if a distributor does pass the savings along, it won't mean much, writes Linda Stern at CBS MoneyWatch.com. If a driver goes through 20 gallons a week, saving 2 cents a gallon would amount to a measly $20 over an entire year, she calculates. "Gasoline at Costco and other discount outlets will save you a lot more than that," she adds.

BP will also help stations by stepping up advertising and reducing the fees stations pay when customers use credit cards, one distributor told AP. The aid could end up costing the company about $50 million to $70 million, one marketer estimated.

This is ultimately just a drop in the bucket. But it shows BP is concerned about slowing sales and, perhaps more importantly, the possibility that distributors will turn around and sue the company to try to get in on the $20 billion compensation fund available to victims of the spill.

Tags: BP
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