The Great Gas War

In the lobby of Roanoke's Hotel Roanoke last week hung a large wreath of yellow roses and gladioli with the inscription: "In honor of those who gave their all in our fight for freedom in the market place." It was a reminder to the delegates at the National Congress of Petroleum Retailers meeting that 60,000 service station operators have bitten the dust in the Great Gasoline Price War, which threatens to be the sharpest and costliest ever.

Price wars have spread like a rash across the nation, dumping prices in some places to as low as 13.9-c- per gal. (it remains 35.9-c- in New York City). Business is so competitive that last year 37% of the nation's 220,000 service stations changed hands or closed down, the highest turnover rate in U.S. retailing. In Chicago, where the battle is sharpest, half of the stations changed hands. The war has hit the major oil companies where it hurts most: the profits of Gulf, Sun, Indiana Standard and Sinclair were down by 9% to 24% in this year's first half.

What causes the wars is the big surplus of refining capacity that major companies built after the Suez crisis. This, combined with the advent of gas-miserly compact cars and smooth-riding superhighways (that save on fuel), has created a glut. Production cannot be fully cut back, because gasoline is just one of the byproducts of the refinery process.

Several years ago, major companies began to get rid of their excess gasoline by wholesaling it to private-brand operators, who then underpriced the big firms' stations by 2-c- or 3-c- per gal. The independents began to grab off 20% of the business in some areas. Last year, to protect their own stations, Gulf introduced its "subregular" Gulftane, and Sun brought out its Blue Sunoco 190, which compete directly with the independents' prices. Other major oil companies also cut prices, financed the local fights by keeping prices high at their stations on superhighways.

Independents are being squeezed badly. Says Pittsburgh Independent Thomas B. Tomb: "I spend most of my time driving up and down the streets looking over my competitors' prices. One day this week I changed my price twice in two hours." Sometimes the price switches seem mysteriously coincidental; an Indianapolis price war ended just before the 500-mile Memorial Day auto race, which attracts tens of thousands of visitors to the city.

Customers, many of whom have little brand loyalty, have become cagey in playing the ups and downs at the fuel pumps. Says Detroit Independent Lee Rogers: "When prices go up, customers start buying 50-c- worth at a time, waiting for prices to go back down before they fill up. The sad part of this thing is that they are right, and I see no end to it."

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