The Industry, 1950-1959
The 1950s were a tremendous time of growth for the petroleum industry as it was for the country. The rise of automobiles put more people in cars and the wide-scale road building made it possible for drivers to hit the pedal to the metal. The decade was not without its bumps, however, with a series of gasoline price wars and pressure of more governmental regulation from officials in Washington.
The ‘50s was not as tumultuous as the decades before with the Great Depression and World War II, but the era dramatically began with the Korean War. The conflict started in June 25, 1950, and NPN immediately began to report on what the war might mean for the petroleum industry.
The July 5, 1950 article, “Korean War News Spurs Tire Buying; Military Oil Demand Stable So Far,” reported that the fear of war possibly shutting off the supply of tires, as it had in WWII, was pervasive. But the piece made it clear that the experience of those war years also improved the cooperation and relations between the oil industry and the military, as funds for fuel storage and dispensing equipment were immediately offered.
Even though the Petroleum Administration for War had been abolished in 1946, the Petroleum Administration for Defense was established for the Korean War by the Defense Production Act, enacted in Sept. 8, 1950. PAD put in place districts to help organize the allocation of fuels, but NPN Washington editor Herbert A. Yocum questioned whether this was really a move by government officials to more closely control the oil industry in his May 9, 1951 article.
A cease-fire was agreed to by both sides on July 27, 1953. However, the U.S. military’s demand for petroleum was still strong, as reported by the NPN July 29, 1953 article “Signing of Korea Truce Will Not Bring Drop in Military Oil Needs.” Although the DPA was abolished in 1954, PAD Districts are still in use today, but only to collect data.
Brutal price wars were prevalent throughout the ‘50s in many parts of the country. The Editor’s Note in the August 23, 1950 NPN detailed an act by an association of gasoline retailers in New Jersey to go “on strike” by shutting down their stations in order to stop price cutting. The Dec. 16, 1953 article “Gasoline Wars—and How to Stop Them” reported, “Price wars were popping like firecrackers with a tendency to re-explode without warning.” Some of the causes cited by the piece included oversupply, private brand price-cutting, too many service stations, majors “cutting each others’ throats,” and “new faces” entering the market.
Dealers were so rocked by the price wars that their organization pushed for a national trade practices conference, reported by the Aug. 18, 1954 NPN article, “Dealers Seek FTC-Backed ‘Code of Ethics.’” The National Congress of Petroleum Retailers suggested a number of bans including on “below-cost sales at service stations” and “all forms of supplier interference in dealer prices and margins,” as well as a “prohibition of ‘special forms of price discrimination’ by suppliers.”
Other government inquiries into the petroleum industry included price investigations and attempts to outlaw the price leader concept.
With the expansion of the middle class in the ‘50s, many more Americans poured their extra cash into buying cars. During WWII, motor vehicle registration in the U.S. had dropped to lower than 30 million, but by 1958, there were more than 67 million cars on the road.
With the profound growth of the automobile industry, the service station also boomed. As reported by a Sept. 30, 1953 NPN article, “1953 is witnessing just about the hottest oil industry competition ever…The fact that 19 major companies are building 33% more stations this year than in 1952 is one solid indication.”
New station ideas began to emerge, a few of them tried before, such as paring gasoline and food together, but some of the concepts started to grab a bigger hold in this highly competitive market. Self-serve became more common, as noted by the NPN April 18, 1951 article “Station ‘Split’ Into Self-Serve, Conventional.” One of the benefits cited was lower overhead costs, which helped dealers offer lower gas prices.
Along with the expansion of offerings, credit also made its way back into the petroleum retail industry after being banned during WWII. In the Sept. 17, 1952 NPN, the article “’Universal’ Credit Card Plans Have Growing Impact on Station Selling” stated that the number of independent gas stations honoring all major company credit cards was booming. The piece also reported that many dealers saw signing up for the credit service as “an essential competitive factor.”
Toll Roads and Interstates
With more cars on the road, the need for more and improved roads became heightened during the decade. In the early half of the ‘50s, toll roads began popping up in places like New Jersey and Oklahoma. NPN featured articles on station building along the roads, including “How Marketers Can Capitalize on Turnpike Business,” published in the July 9, 1952 issue. The piece was an overview of the turnpike picture detailing information on turnpike stations, independents on turnpikes, oil marketing adjacent to turnpikes and the effects of turnpikes on future traffic patterns.
Amidst the proliferation of the toll roads, NPN praised the highway authorities in various states for turning to station competition instead of exclusive concessions, as reported in the Aug. 26, 1953 article “Toll Roads Are Swinging to Brand Competition.” Additionally, the article gives advice to those marketers that were going to be adversely hit by the new roads “stranding” their stations.
Some of the new stations being built along the roads became obsolete rather quickly, however. According to the Oct. 21, 1953 NPN article, entitled “Sensible Planning for Turnpike Stations,” Pure Oil Co. submitted turnpike station recommendations in Ohio when stations along the New Jersey Turnpike had to be remodeled after only a year’s service. Those stations, designed by New Jersey state-employed architects, had to have their “roadways arranged, parking areas changed, island installations improved, and additions made to buildings.”
In June of 1956, the Federal Aid Highway Act was enacted, which appropriated $25 billion for the construction of 41,000 miles of interstate highways. NPN published a mixed-emotion article on the law, entitled “What the Highway Program Means.” The feature illustrated the “new threats and new opportunities for marketers.” Among the threats, the article cited new traffic patterns created, which meant thousands of service stations would be relocated. On the other hand, thousands of new stations were going to be built to service the new interstate system, and those sites would be competed for freely. However, it was questionable whether the “choice sites” were going to go to the major oil companies. Also, to finance the project, the federal tax on motor fuels was being raised from 2 cents a gallon to 3 cents a gallon, which meant the jobber was to “have one-third more money tied up in federal taxes.”
Competition - Branding and Advertising
The competition between oil companies to gain market share was fierce throughout the ‘50s. In the Sept. 2, 1953 article “Industry Is Warming Up for Gasoline Fight,” NPN reported on the push Phillips Petroleum Co. made to enter the Southeast station markets. The company started out aggressively by opening 55 stations in the Tampa, Fla. area. Only ten of the stations were new, the rest were acquired existing stations. Within three years of its entry, Phillips would place third highest in Florida’s gasoline gallonage total.
Some of the ways oil companies began distinguishing themselves were through new marketing plans and promotions. Gaining much steam was the controversial stamp program, a device used by some dealers to increase volume through encouraging customer loyalty and repeat business. It was popular with customers, who could collect stamps in turn for prizes. As reported in the article “The Midwest: Giveaway Fever Grips Chicago” in the NPN April 1959 issue, dealers were giving away “half pounds of coffee, choice of Sunday papers, half dozen eggs, large boxes of soap powder,” and more.
However, some in the petroleum industry despised the program, as one official in the June 1958 NPN “Stamps” article called them, “the greatest scheme since Ponzi.” Some marketers complained the stamps cost too much and claimed they caused price wars.
Oil companies also started to put out multi-grades of gasoline to capture customers’ brand allegiance. Higher octane ratings of fuel became a major focus, as reported in the Nov. 11, 1953 NPN article “Premium Gasoline New King in Market.” The costlier fuels began to get a nationwide advertising push, resulting in premium becoming a station sales leader. In order to compete, oil marketers began gearing up to offer upgraded gasoline.
New advertising campaigns also started to be unveiled at the end of the ‘50s, with an emphasis on stations being modern and clean. Union Oil started to heavily promote a new inspection program using a brigade called the “Sparkle Girls,” as reported in the NPN June 1959 issue. This type of marketing plan was akin to Phillips 66’s “Highway Hostesses,” who were made up of young women paid to ensure that stations’ restrooms were clean and well stocked.
Aggressive advertising would continue to reach new levels in the ‘60s as a highway culture took hold in America, thus, paving the way for what is considered to be the golden era for oil companies.