February 12, 2007

Hess

And the man behind the brand is...
Leon Hess

Leon Hess was born to Lithuanian parents in Asbury Park, New Jersey in 1914.
In 1925 after twenty years of kosher butchering his father Mores quit to deliver fuel to homes in the beachside town. The Depression killed what little business Mores had built up over the years. Leon's two older brothers and sister attended college but there was no money left for him. Leon Hess got the struggling oil business.

In 1933 that business was a single room in an old building in Asbury Park and an over-mortgaged and undersized truck. Hess drove across bumpy pine-draped roads selling oil and coal by day and delivering on his return trip at night. The coal would soon be dropped from his tiny product line - literally. "I was basically lazy. I didn't want to carry 100-pound bags of coal," he said.

In the late 1930s Hess began to focus his meager resources on residual fuel - the tarry, gunky ooze that remained after refining. The sludge was useful only in massive boilers maintained by public utilities. From his attempts at peddling coal Hess knew oil was replacing coal at power plants and residual oil would become more profitable.

Residual oil had to be transported hot to keep it flowing; if it cooled it became the consistency of a newly tarred street in summer. Hess built a successful fleet of specially designed tankers to deliver the residual oil. He began shipping to distant markets and came in low bid on several federal contracts, submitting the only handwritten bids.

In World War II Hess left the business with his brother Henry and went to battle as petroleum supply officer under General George Patton. He earned a bronze star, the rank of major and invaluable experience in running a large organization efficiently.

He applied his lessons to his oil business which steadily expanded. Hess trucks were soon seen as far away as upstate New York. He began importing residual oil and Hess oil generated the electricity in 75% of New Jersey by the late 1940s.
In 1958 Hess built his first refinery and two years later he marketed gasoline under his own name.

Hess built his business on business no one else wanted; now he was in the business everyone wanted.

He competed on price. He refused to comply with an agreement signed by other New Jersey stations to keep gas priced above a minimum price.
He built huge stations to pump gas only, leaving repair business to others.
His refinery was close to his stations so the pennies saved in distribution were slashed off his gas prices. Hess grew from 28 stations in 1961 to 500 in twenty years across the Northeast.

By the mid-1960s Hess Oil was profitable but he had no crude production, leaving him in a precarious position if his supply disappeared. After prolonged financial maneuvering and at considerable risk Hess took control of Amerada Petroleum in 1969.

At the same time Hess undertook the building of the world's largest refinery in the Virgin Islands, a United States territory not fully answerable to American law. Hess used political connections made by his father-in-law, a former attorney general of New Jersey, to pull off the deal. The refinery cost $600,000,000 and eventually produced 700,000 barrels a day.

Hess Oil was now steeply leveraged but the Arab oil embargo paid off Hess' gamble. His fortunes continued to vacillate with the fortunes of the oil market but Hess, the owner of the New York Jets and a tyrannical but trustworthy businessman, had built his company into the country's 17th largest oil producer.

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