CITGO's Gasoline Contract with 7-Eleven Set to Expire

CITGO Petroleum Corporation’s contract to supply 7-Eleven stores with gasoline will expire next week and 7-Eleven’s discomfort with CITGO’s Venezuelan ties has contributed to a decision to end the twenty-year old relationship. CITGO is a Houston-based subsidiary of Venezuela's state-owned oil company, PDVSA. After Venezuela's President Hugo Chavez crudely attacked President Bush in a recent speech to the United Nations, 7-Eleven evidently decided to take a step back from the conflict.

Reportedly, 7-Eleven's change in gasoline suppliers was already in motion long before President Chavez spoke last week. 7-Eleven has also said that all of its new gasoline suppliers will be U.S. companies. CITGO employs at least 4,000 workers in the United States and an informal, but growing call for a boycott of CITGO products could have serious ramifications for American employees who have no real sympathies for the current Venezuelan political situation.

Last week’s inflammatory speech Chavez will likely do nothing but ramp up tensions between the South American oil producer and its biggest customer. Referring to US President Bush as “the devil,” Chavez underscored the ongoing disagreements between the Bush administration and Venezuela’s increasingly leftist regime. Behind the rhetoric, however, are substantial indications that Venezuela is more than determined to divert a significant portion of its energy output to places other than the United States. The 7-Eleven decision may very well force PDVSA to move up the timetable on that plan.

Venezuela currently provides about 11% of US petroleum imports, but PDVSA exports to the U.S. fell by at least 15% in the half of this year. Earlier this year, a marked reduction in the number of U.S. gas stations supplied by PDVSA and the sale of one of its Gulf Coast refineries is raised more eyebrows. Other assets are also rumored to be for sale, as well.