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Cosby Oil Thrives Alongside Big Rivals

Focusing on niche customers is one way the gasoline seller survives in a tough market.

February 03, 2003|Elizabeth Douglass | Times Staff Writer

With just 60 employees and no refineries, tiny Cosby Oil Co. could hardly be mistaken for an energy giant such as ChevronTexaco Corp.

"If they wanted to, they could squash us," Cosby Oil Chief Executive Larry L. Clanton said of the big petroleum companies.

"But right now we survive with them," Clanton added from his no-frills corner office in Santa Fe Springs, where just beyond the door, runners of black carpet crisscross the hallways to help disguise greasy footprints. "We do what they don't want to do or can't do as well."

Indeed, Cosby has managed to find a niche in the shadows of the energy titans -- selling gasoline and lubricants to such diverse customers as oil-change shops, film studios and hospitals. It also stocks the fuel tanks at independently owned gas stations and supplies gas to a network of fuel pumps used by corporate fleet vehicles.

"Most people in the general public think there are only five major oil companies left in the world," said Amy Myers Jaffe, senior energy advisor at Rice University's Baker Institute in Houston. "But it's more complicated than that."

Cosby Oil is one of about 200 independent oil marketing companies in California. Most of them are tiny operations eking out a profit by serving farmers and small businesses in rural communities.

In cities such as Los Angeles, Cosby Oil faces competition from Orange-based Southern Counties Oil Cos. and other firms focused on the same kinds of customers and markets.

"There is a camaraderie in the industry that is deep because of the family traditions," said Jay McKeeman, executive vice president of the California Independent Oil Marketers Assn. Still, he noted, "they'd take each other's customers in a heartbeat."

Oil prices have been on the rise because of civil unrest in Venezuela and the threat of war in Iraq.

But small oil marketers say it is having little effect on their businesses because customers tend to go to them for service, not to find a better price.

"We're pretty aggressive, but we're all on a level playing field when it comes to price," said Pat Cullen, owner of Dion & Sons in Long Beach. "If I take a customer, it's not because I stole him from you but because you weren't servicing him properly for some reason."

Cosby Oil was founded in 1939 by W.E. "Bill" Cosby (no relation to the comedian) and today is run by Clanton, his grandson. Cosby moved to Southern California from Arkansas in the 1920s and toiled in the oil fields. When an injury forced him to abandon such rugged work, he bought a truck and started delivering fuel to filling stations.

The company was known as Cosby U-Serve Stations Inc., and by the 1960s it boasted 20 locations.

Today, however, Cosby Oil has only one station, in Buena Park. Clanton, who took over after his grandfather's death in 1978, restructured the business to avoid head-to-head competition with the big oil companies. He shifted out of the retail market and added lubricants, racing fuel and other specialties to the company's product line.

Today, Clanton said, Cosby Oil is profitable and posts annual revenue of more than $20 million.

On a recent Friday morning, Bob van der Valk, Cosby's manager of bulk fuel sales, had his ear to the phone, talking with customers while keeping his eyes fixed on the changing wholesale price for West Coast gasoline.

A nearby chalkboard listed the per-gallon prices being charged by suppliers. Van der Valk plays a crucial role, deciding which suppliers to use to get the best prices for both Cosby Oil and its customers -- which he won't name, so as not to provide leads to competitors.

"We're dealing with a product where the price changes at least once a day and can spike as much as 15 cents a gallon over a few days for some types of gasoline," Van der Valk said. That may not matter much to an everyday motorist, but for someone running a fleet of trucks, such price swings can mean the difference between profit and loss.

For that reason, when Van der Valk sees a pricing trend, he works with customers to steer their orders through at the lowest prices. On Tuesday, for example, news of a crude oil unit out of operation at Chevron's El Segundo facility sent prices up sharply in California, so Van der Valk booked more delivery trucks and urged customers to fill their tanks before prices rose even higher.

Though a war in Iraq probably would boost fuel prices, Van der Valk said, Cosby Oil's commercial and industrial customers have too little storage capacity -- and not enough idle cash -- to buy and hoard lower-priced fuel.

"I'm just getting more of tomorrow's orders today," he said.

Cosby's biggest market emerged when tougher environmental laws required costly upgrades to underground fuel tanks in California. Many businesses that had on-site fueling stations decided to remove their tanks. That's when Cosby and other independents jumped into the fleet-fueling business through a network of self-serve stations.

The stations, known as "cardlock" sites, operate much like an automated teller machine system for gas, in which trucks use fuel cards and special codes to fill up. Companies with fleets often favor the card-lock system because the typical site doesn't have a snack-filled mini-market to delay drivers. The setup also makes it easier to track fuel consumption.

Clanton, 50, hopes the business will keep growing, but he can't be sure that Cosby will survive another generation. His 32-year-old stepson is in financial services, and his daughters are teenagers.

If interest wanes within the family, he said, "I may be one of those that sells."

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