THE INDUSTRY, 1930-1939
The 1930s began with a dark cloud; the Wall Street Crash of 1929 had just occurred months before, and at the start of this decade, the effects on the U.S. were starting to take hold. Despite the dire circumstances surrounding the beginning of what would be the Great Depression, gasoline retailing actually did not shrink as much as other business sectors. The petroleum industry matured during this period, with big oil companies creating and implementing wide-ranging marketing plans as well as fighting, and sometimes coming under, an increasing amount of governmental regulations.
The number of cars dropped from 26,500,000 in 1930 to 23,800,000 cars in 1933, according to the NPN Feb. 5, 1936 article “Oil Marketing a Typically American Merchandising Enterprise.”However, the number of service stations continued to grow, especially with large numbers of unemployed people, some who got into the business of selling gasoline because they found it simple and easy to start up. The overgrowth of stations slowed in the middle of the decade, and sites were starting to be standardized with rather simple structures.
Not only did demand for oil drop in the early part of the decade, but the market was flooded with it, as a major oil field in East Texas was found in 1930. Government stepped in to try to stabilize the industry through conservation regulations in the production sector. However, competition ramped up as a result of the overproduction and dozens of national and local brands popped up to sell oil. At the end of the decade the number of stations at the had actually doubled from 1929.
As we are seeing now, hard times cause businesses to focus on the most effective practices. With the amount of jobs being lost, numerous banks being closed and scores of people left with a mound of debt, the excess of money available to be spent on consumer goods was considerably reduced in the ‘30s.
The slowdown in consumption of gasoline is evident in NPN articles, such as the Sept. 17, 1930 piece “Rate of Gain in Gas Consumption Is Reduced Sharply in July,” which stated “One of the most important factors in the present trend of gasoline consumption is the lag in sales of new cars and trucks.” In that same issue, the article “10,000,000-Barrel Gasoline Stock Cut Will Forestall 1931 Disaster” makes it apparent what effect the decrease in consumption and overproduction had on the amount of oil the industry was stuck with.
To spur sales, gasoline retailers started to offer coupons, which became a popular marketing practice with several NPN articles covering it in 1930. One entitled “Proper Accounting Prevents Loss In Redeeming Coupon Books” explained how to track these discounts in the financial books.
Other early petroleum marketing tactics included trying to boost demand, namely through promoting tourism. In the July 23, 1930 issue, the article “Service Stations are Units in Complete Travel Bureau” provided details of how one oil company, Continental Oil Co., had a travel bureau that planned “a trip as thoroughly as any established professional bureau.” Standard Oil Co. of Ohio also jumped onto the tourist bandwagon, as reported in a July 20, 1932 article entitled “Helping Sales...by Promoting Touring,” with their “See Ohio First” advertising campaign.
During this period, oil companies started to put more emphasis on stations selling not just gasoline, but a plethora of products. The Sept. 3, 1930 article entitled “Tennessee Marketers Told to Diversify Their Lines to Increase Profits” documented how some stations were given advice to include selling oil, lubrication, tires, batteries, brakes and rims. In a Sept. 17, 1930 article, “Nation-Wide Tire Merchandising Planned At Standard Oil Co. Stations,” detailed the move Standard Oil made to abandon “the policy which the larger marketing companies have followed to date — the handling of petroleum products and services exclusively.”
This kind of diversification message continued and expanded, as the Aug. 26, 1931 NPN article “Ice Cream, Soft Drinks, Tobacco Increase Station Profits” suggests. This piece reported that the extras were provided and sold by a jobber company that operated 12 stations in the Kalamazoo, Mich. area. An article appearing in the Sept. 2, 1931 issue, “Gasoline-Food Combination Watched As New One-Stop Service,” detailed the first gas-food mix by big oil, as the Standard Oil Co. of Indiana had installed a sandwich shop next to one of their stations in Chicago.
Other areas of marketing came into focus as well, such as the emphasis on customer service. In the July 1, 1931 issue, the article “Does Service Pay?” appeared, telling the story of how a Chicago station operator increased his sales by 17 percent because of the increased service his employees provided his customers, such as washing windshields, checking radiators and inflating tires. As it is now important for service stations to look modern, the old model of tearing down stations to build new ones started to be abandoned as cash became tight. The Aug. 3, 1932 article “Inexpensive New ‘Shirt Fronts’ For the Service Station Wipe Out Obsolescence” gave tips on how to beautify current stations.
For the stations that were replaced, the oil companies began to impose a standard design, as discussed in the Aug. 10, 1932 article entitled “Station Replacement Trend Is Toward Standard, Unit Built Outlets.” This practice emphasized a scientific approach to building stations that would maximize their profitability. An example of this type of station was shown in the Sept. 21, 1932 article “How Shell Modernizes Its West Coast Station Buildings.” The piece reported how the oil company comes up with a way to tie together nearly a thousand service stations by designing them all in a similar, modernistic way.
The Revenue Act of 1932, signed into law by then President Herbert Hoover, enacted dozens of taxes, among them was the federal gas tax. It was supposed to raise $150 million and help balance the federal budget when revenue from income tax and other sources dropped off during the Depression.
The government began to collect a tax of 1 cent a gallon gasoline. A Feb. 5, 1936 NPN article entitled “Your Gas Bill” stated, “In 1934, it (the gas tax) provided one-third of all taxes collected by the 48 states, and 80 percent of all the money spent on state highways.” Motorists didn’t seem to mind the taxes as much when seeing it spent on road improvement. However, other problems to avoid federal taxation began cropping up, such as bootlegging, or smuggling gasoline across state lines, and “substitution,” which involved “racketeers” mixing non-taxable fuel with gasoline.
In the middle of the decade, a problem that had been brewing was beginning to erupt—labor. In the editor’s note in the April 25, 1934 issue, NPN’s editor Warren C. Platt commented, “The biggest and hardest problem in the Industry today is that of its relations with its employees.” The industry began to deal with dozens of worker strikes across the nation. In Cleveland, service station employees refused to work and truck drivers there began to follow suit.
Some blamed President Franklin Roosevelt’s support of the labor unions for boosting the amounts of strikes and protest. Regardless, the message got through to the nation’s leaders. In a June 25, 1938 article, one of the proposals put in front of Congress was a wage-hour bill, which was supposed to provide a 25-cents an hour wage “floor” for the first year and 30 cents an hour thereafter as well as limit the work week to 44 hours.
The petroleum industry came under much governmental regulations in this decade and fought against much more proposed legislation. To keep overproduction under control, the government enacted the Interstate Oil Compact of 1935, which helped to stabilize the industry.
Some states started to impose price-posting laws to stop the problem of secret discounts and price wars. However, an article appearing in NPN in Aug. 18, 1937, entitled “Dealers Blockade Station Drives As Positing Laws Upset Markets,” reported that the sign advertisements had begun to bring about open price cutting.
One bill that gained a lot of attention from the major oil companies in the late ‘30s was a marketing divorcement bill. This proposed law was designed to force major oil companies to withdraw completely from the marketing of petroleum products. This was an attempt to stop the majors from using their production and pipeline profits to offset losses in marketing. NPN devoted dozens of pages in its July 1939 issues to print the congressional testimonies of the oil industry leaders from the June hearings. The investigations into the industry were just beginning, however, and politicians began calling for federal regulation of oil.