- The Washington Times - Wednesday, November 8, 2006

BOSTON

Venezuelan President Hugo Chavez’s calls for a socialist revolution haven’t made it easy for Citgo Petroleum Corp. quietly to go about refining oil and selling gas to U.S. consumers or steer clear of spats between Caracas and Washington.

But now, the U.S. arm of Venezuela’s state-owned oil company faces its biggest such challenge since Mr. Chavez took office in 1999.

His speech at the United Nations calling President Bush “the devil” has left Citgo dealing with a political backlash. In the weeks since Mr. Chavez’s Sept. 20 U.N. speech and his comments the next day at a New York City church referring to Mr. Bush as “an alcoholic and a sick man,” momentum has been building for a U.S. boycott of Citgo products.

Mr. Chavez’s remarks also inspired anti-Citgo proposals — for example, a Boston politician wants to tear down a Citgo sign that is a prominent landmark on the city’s skyline, and a Florida lawmaker wants to end Citgo’s exclusive filling-station contract on the Florida Turnpike.

Analysts don’t expect anti-Chavez sentiment to have a lasting effect on Citgo’s bottom line, since gasoline consumers typically put price above principles.

But amid the backlash, the Houston company last month began running full-page ads in major newspapers touting its 4,000 U.S. employees, its program to provide discounted heating oil to needy Americans, and work on behalf of charitable causes, such as disaster relief and fighting muscular dystrophy.

Citgo won’t discuss the campaign’s cost, but says it’s not an effort to repair any financial damage from a consumer backlash targeting more than 13,000 independently owned, Citgo-branded U.S. filling stations.

“The company has seen no impact on sales volumes from any calls for a boycott of our products,” Citgo spokesman Fernando Garay said.

That claim is difficult to verify since the privately held company doesn’t disclose financial data.

An Aug. 28 report from ratings agency Standard & Poor’s noted much of Citgo’s free cash flow is returned to its parent company, Petroleos de Venezuela S.A., through dividends. Citgo has returned nearly $1.2 billion in dividends to its state-owned parent since the start of 2005, according to company news releases.

The S&P; report also said that because Citgo doesn’t own its U.S. filling stations, it “does not benefit directly from convenience store and other nonfuel revenue.”

Meanwhile, scattered reports of falling sales at Citgo stations have surfaced in states like Oklahoma, where one distributor last week reported drops of 10 percent to 15 percent after Mr. Chavez’s U.N. speech.

In the long run, experts say Citgo isn’t likely to suffer significant economic harm, given the failure of past oil company boycotts such as the anti-Exxon campaign after the tanker Exxon Valdez spilled oil along Alaska’s coast in 1989.

“Most people are going to make a decision on where they pull in to fill up their tanks based on price and convenience,” said Tom Kloza, director of Oil Price Information Service in Wall, N.J. “There aren’t going to be a lot of folks who say, ‘I’m not going to buy there because Hugo Chavez is going to benefit if I buy from Citgo.’ ”

“These boycotts tend to make some noise, but they don’t tend to get much traction out there,” Mr. Kloza said.

Citgo’s ads were prompted in part by press reports indicating that the convenience-store chain 7-Eleven Inc. had dropped Citgo as its longtime gasoline supplier a few days after the Chavez speech.

A 7-Eleven spokeswoman indicated Mr. Chavez’s comments didn’t help Citgo’s cause, but attributed its decision largely to a plan already in the works to introduce its own brand of fuel.

Citgo’s ad says U.S. consumers “have been inundated with misleading and inaccurate information” about the decision that “have led to numerous calls for a boycott of our products.”

That doesn’t dissuade Dan Wright, a Web-site developer who said he created the site www.citgoboycott.org a few weeks before Mr. Chavez’s U.N. speech.

Various conservative groups and politicians have called for a Citgo boycott in recent years, and some companies have refused to do business with the oil firm. But the cause didn’t coalesce until the Web site was created and Mr. Chavez’s speech provoked anger, Mr. Wright said.

“I basically donated my time and resources for this Web site,” he said. “It’s not backed by any kind of special interests or anything.”

The Web site also champions efforts of a handful of anti-Citgo politicians, such as Boston City Council member Jerry McDermott. The Democrat is pushing a resolution calling on Boston University to cancel a contract to rent a neon lighted sign bearing Citgo’s red triangle logo atop a university-owned building, prominently seen by fans watching Red Sox games at nearby Fenway Park. Mr. McDermott’s proposal hasn’t yet come before the full council and is opposed by Mayor Thomas Menino.

The day after Mr. Chavez’s U.N. speech, Maine Gov. John Baldacci, a Democrat who cruised to re-election Tuesday, said his state wouldn’t renew participation in a program that provided needy residents with discounted heating oil from Citgo last winter. In Alaska, a few Eskimo and Indian villages have refused Citgo’s discounted heating oil this winter, although other villages accepted.

In Florida, Republican state Rep. Adam Hasner has asked state transportation officials to cancel Citgo’s exclusive contract to sell fuel at Florida Turnpike service stations.

Floridians “shouldn’t have to support an exclusive contract with Citgo,” Mr. Hasner said.

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