The Industry, 1980-1989
Reverberations from the oil shocks of the ‘70s continued into the 1980s, this time causing an oil glut. Within a very short period of time, oil went from a relatively cheap source of energy to an expensive one. The drastic change caused some cultural shifts, such as a greater emphasis on automobiles’ fuel efficiency and conservation efforts. However, the energy crisis also sparked an economic slowdown, which also reduced the demand for oil.
Oil production in the ‘70s was ramped up, only to saturate the market in the ‘80s, as was reported in the article “Drowning in a Sea of Gasoline?” appearing in NPN October 1980. The article explained the situation as a result of a combination of things. “The U.S. recession has been worse than predicted, the fuel-efficient car population has developed faster than expected, and Saudi Arabia had disregarded a faltering world economy while forcing excess crude-oil production on the market.”
In attempts to stem the tide, OPEC cut its oil production many times from 1980 to 1986. The actions weren’t enough to stop the oil price slide that happened during those six years. However, another factor that affected prices was the decontrols of the federal price and allocation regulations that were enacted during the 1973 oil embargo. After his election, Ronald Reagan signed an executive order on Jan. 28, 1981 to immediately remove market controls from petroleum products.
The industry was abuzz after this movement, as reported in the February 1981 NPN article entitled “Decontrol: A Brave New World.” The report stated that street competition would be ramped up, “Bloody battles are expected in the future, interrupted only by possible occasional tight supply, as demand continues falling and aggressive marketers shoot for higher per-unit gallonage to cover their skyrocketing investments and operating costs.”
The change to the new free-market arrangement seemed to make large jobbers happy, but made smaller ones concerned over the price hikes, as reported in the April 1981 NPN article “Decontrol Price Run-Ups Hurt Some But Large Jobbers Like Free Market.” However, the December 1981 article “White-Knuckle Times Ahead” reported on the challenges of the times, many of them like credit cards, were just the beginning of the decade’s trends.
Credit cards had been around awhile by the ‘80s, but with the creation in the ‘70s of the bank card associations—first Visa, then MasterCard— the credit industry was bolstered. Many oil companies were offering their own credit card programs. In the NPN July 1980 article “How Companies Are Coping With The Credit-Card Sting,” one major company manager of credit operations described the varying ways the majors treated their programs; “’Companies look on credit cards in different ways depending on whether they consider it a marketing tool or a profit center.’”
Putting further emphasis on point-of-sale, the majors also started to roll out their debit programs. The NPN March 1986 article, “Retail POS Systems: Waiting For the Golden Egg to Hatch,” reported that the beginning of debit in the petroleum industry was a precarious one. “As for the oil industry, the response has been one of cautiousness, as most companies begin with credit authorization programs and consider debit only as an option.”
The article described both Mobil and Shell testing the waters. However, critical questions still remained at this point, such as who would pay for the convenience of credit, banks or marketers? The article reported, “Oil marketers have been frustrated by bank fees time and again. Arco cut off some of its debit test in Santa Clara County, California, because Bank of America asked for big fees.’”
Despite the cautious beginning, the petroleum industry seemed to push full-speed ahead a few months later. The NPN September 1986 article “Pushing Debit: Will New POS Plans Make Consumers Bite?” reported, “oil marketers are now laying their bank cards on the table and unveiling to the public their large-scale, multi-million dollar point-of-sale (POS) programs. The fact that millions of consumers are now being allowed into the game is surprising, since just a few months ago the rush toward a so-called ‘cashless society’ appeared stifled by a gamut of unanswered questions.”
Technology changes came fast during the decade, costing marketers hundreds of millions of dollars in upgrades. The article “High Cost of Gearing Up: Can You Afford Not To?” appeared in NPN January 1982 and ran down the future of petroleum equipment needs:
“Much pre-1980 retail marketing equipment will be outdated by the end of the decade, with total automation of retail facilities now fast approaching; Faster dispensing and integrated accounting systems will be necessary to meet the high-volume, high-traffic demand that far-sighted marketers—the trend setters—are preparing for; Multi product dispensers, credit card validators for self-service and card-lock systems, electronic funds transfer systems, and computer-controlled functions for instant remote inventory and other accounting tasks will be common in the retail centers; Higher and higher gallonages will be required to make all of the expensive sophisticated gear pay out.”
With the credit card push, Gilbarco introduced the modern pay-at-the-pump device in 1986, with its Card Reader In the Dispenser system. The technology had a slow start, but would become more widespread in the ‘90s.
Additionally, more articles started appearing about computers in the pages of NPN throughout the ‘80s, such as the April 1986 article “Computer Software Finally Catches Up With Jobber Needs.” According to the piece, “In 1982, less than half of the respondents to a profile survey by the Petroleum Marketers Assn. of America reported using computers in their business. By 1984, that figure jumped to 63%.”
The convenience store had made strong headway into the petroleum industry years before, but during the ‘80s, marketers began to invest more heavily into them. In the May 1986 article “Today’s C-stores: How They’re Changing for Oil Marketers,” NPN reported on how big the expansion of c-store and food marts were becoming:
“In the late 1960s and early 1970s, some marketers found that for under $10,000 they could add pumps or convert a service station into a combined C-store/gasoline facility, and operate the unit with a single cashier.
“Times have changed.
“Some large-chain independent gasoline marketers are now building combination C-store/fast food/self-serve gasoline facilities that often cost from $500,000 to $1 million or more.”
With the focus more on bigger sales in the c-store, other problems arose, such as shrinkage. In the July 1987 article, “Putting the Finger On Employee Thieves,” NPN reported on a new type of crook; “Employee theft is considered the major cause of C-store shrinkage.”
To keep up with the fast-pace technology changes, the majors began to spruce up their image at station sites, with greater emphasis on constructing new, modern stations. In the June 1987 article, “Majors Are Pushing Image Upgrades With Rebate ‘Carrots’ for Marketers,” NPN reported on the majors providing station enhancement incentives to jobbers. The rebate programs varied, covering upgrades that ranged from sleek canopies and more islands to lighted signs and a fresh paint job.
In the May 1988 article, “Modern Station Design: A New Face For Gasoline Marketing,” NPN reported on what encompassed the contemporary style of the times, complete with a glossary. Many of the pictures of the newly built stations look like the ones today, with a focus on the canopy and lighting. “In almost all of the new station designs, canopies come across as the main attention-getter. They establish identity, some more successfully than others. The effectiveness of the canopy at night depends heavily on its lighting.”
The environmental awareness introduced in the ‘70s stuck and caused major changes to petroleum, both the product’s formulation and storage. For instance, the Environmental Protection Agency required that all large gas stations offer at least one grade of unleaded fuel. This brought about a drop in leaded gasoline sales.
On account of the oil price shocks, people became more interested in conserving oil and using alternative fuel sources. Fuel efficient cars were suddenly in demand, as new passenger car fuel economy rose from 17 mpg to more than 22 mpg in 1982. Many people made the switch in heating their homes from fuel oil to natural gas. Additionally, ethanol blended gasoline started to become more commonplace, as reported on in the NPN August 1983 article “Alcohol Fuels Boom: Industry’s New Time Bomb?”
The EPA also began to regulate underground storage tanks in the final years of the decade, as reported in a number of NPN articles, such as the September 1985 “Underground Tank Update: A Problem That Won’t Go Away.” Although the EPA delayed the release of the regulations, it was finally dropped in mid-September in 1988, according to the NPN November 1988 article “No Big Surprises For Marketers In Final Underground Tank Regs.”
In addition to the thousands spent on getting up to code on their underground storage tanks, some marketers also found themselves having to spend money on Stage II vapor recovery systems. In addition to the frustration the government regulations caused, the pressure put on marketers and the new rules’ ramifications would continue into the next decade, resulting in many stations closing for good.