By Dan Gilligan, President, The Petroleum Marketers Association of America
While the first issues of Convenience Store Decisions were rolling off the presses in 1990, the petroleum marketing industry was undergoing significant evolution both in regulatory and marketplace factors.
At that time, a very large portion of gas stations were owned or branded by the major oil companies. The majors own very few today, but continue to brand tens of thousands of outlets. Independent marketers, many of whom make up the Petroleum Marketers Association of America (PMAA), bought most of the stations previously owned by the majors.
A very important regulatory matter changing the industry was the new national underground storage tank (UST) regulations adopted by EPA in 1988. The new regulations required substantial investment in new or upgraded UST systems. They changed the industry dramatically because of the capital investments required to stay in the business.
Ultimately the new regulations resulted in the closure of more than half the UST systems in the U.S. and thousands of small gas station owners had to close. Also the fuller integration of self-serve gas stations and private brand retailers would change the industry forever.
In the 1990s, as chain retailers and big box stores began to gain market share, traditional petroleum marketing companies became very concerned about predatory pricing schemes designed to drive smaller competitors out of business. There were also concerns about major oil company direct operations undermining their independent customers.
Predatory pricing by big box stores and chain retailers was growing more troublesome. As bigger companies moved into smaller markets, they would on occasion use their deep pockets to crush existing local competitors. They could sell at a loss long enough to close the competition and then regain losses when competitors were gone. In 2001, PMAA worked feverishly on Capitol Hill to outlaw predatory pricing but the opposition was well funded and well organized.
Today most gasoline retailers have learned that market share can be gained without using below cost schemes. A competitive price and exceptional service works just as well and is not so costly.
The terrorist attacks on Sept. 11, 2001 brought another issue to the forefront. Nearly every gasoline and diesel retailer nationwide saw a 50 cent-per-gallon rack price increase within 12 hours of the attack in New York and Washington, D.C. How could those increases be justified? Supply in 99% of the country was not impacted so why did every rack skyrocket?
This situation revealed how much power investment banks and hedge funds had to influence gasoline and diesel prices at the pump. PMAA continues today to lobby for measures to diminish the power of speculators to dominate the petroleum markets.
The industry set out to seek laws limiting interchange fees and succeeded in 2010 to pass a law limiting debit card fees. We continue to fight for laws limiting credit card interchange fees, however, after losing on debit cards, banks have redoubled their lobbying forces to oppose our initiatives.
So as the industry prepares for the next 25 years, retailers will need to plan ahead for more environmental regulations governing USTs and fuels. New ozone and air quality standards could really create chaos in the gasoline market places as some locations will be forced to offer RFG while competitors 10 miles away will not. Federal vehicle mileage standards will likely keep gasoline consumption flat for the foreseeable future.
New higher octane fuels will likely be needed as car makers are now designing new engines to improve miles per gallon. Alternative fuels, such as CNG, LNG and hydrogen, will also have some impacts.
To end on a positive note, retailers can be assured that gasoline and diesel will remain the dominant transportation fuels for the next 40 years. If you have a good location and offer great products and services, a successful future is yours for the taking.