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As SIGMA celebrates its fiftieth anniversary, each issue of Independent Gasoline Marketing during 2008 will recall a different decade in the history of the petroleum industry. Mark Ward, who has reported to IGM about the industry for more than twenty years, will look back through the pages of the magazine and other sources to reconstruct the highlights of the five decades in which the association has represented independent marketers since its founding in 1958.
Historians recall the 1960s as a decade of great social change, sometimes treating the 1970s as an afterthought. Yet the reverse is true in petroleum, where the oil shocks of the 1970s are seen as giving birth to the industry as we know it today and the 1960s were only the calm before the storm.
In many ways that assessment is correct. The petroleum industry of the 1960s had more in common with the immediate postwar decades than with the industry today. Even the federal Energy Information Administration begins its Petroleum Chronology of Events in the year 1970 with passage of the Clean Air Act which mandated the phasing out of leaded gasoline.
Up through the 1960s, the story of oil was one of continuous expansion as crude production in the lower 48 states reached its historic peak in 1970 at 9.4 billion barrels per day. And in 1972 the nation’s oil well productivity reached its all-time high of 18.6 barrels per day.
(Since then, both figures have declined by nearly half.) In the 1960s oil imports were rising but still accounted less than half of domestic consumption. And though OPEC was formed in 1960, the organization’s official history describes the ensuing decade its “formative years” when “activities were of a low-profile nature.” As late as 1969, world oil prices stood at around $5 per barrel.
Thus the petroleum industry of the 1960s is a picture of expanding production and consumer demand, low prices at the pump (where motorists bought leaded gasoline from mechanical dispensers and paid with cash), and minimal environmental regulations as compared to today. In short, it was a world far different than 2008. And yet the 1960s brought two changes that, for independent marketers, would come to define the retail business. For in the mid 1960s the future began to take shape with the advent of major highways and self-service fueling.
Golden Age for the Majors
Riding the crest of a decades-long boom in production, major oil companies were at the height of their influence in the 1960s. The great optimism of the time is suggested, for example, by the seemingly unbounded growth of Gulf Oil (see IGM, September/October 2007). Buoyed by the expansion of its Kuwaiti oil production facilities in the late 1950s, the company plowed the capital into establishing new operations throughout the Mediterranean, Europe, India, and Africa. Exploration, production, and marketing were all ramped up during the 1960s, resulting in a number of new Gulf oil refineries and petrochemical plants.
By 1968 Gulf Oil had launched six Ultra Large Crude Carriers (ULCCs) including the Universe Ireland, which at 312,000 tons was the largest vessel in the world. And to handle these tanks, the company built deepwater terminals in Ireland and Japan. After a prosperous decade, Gulf Oil in 1970 could boast 58,000 worldwide employees, 163,000 shareholders and $6.5 billion in assets, while processing had reached 1.3 million barrels of crude per day. For a time, Gulf was even involved in nuclear energy.
In 1965, advertisements on television and radio carried the message, “Zoom! Zoom! Cities Service is CITGO Now.” The re-branding of the former Cities Service Company was the culmination of its rapid growth during the decade. Already in 1960 the company enjoyed annual revenues of more than $1 billion, was operating in five countries and producing 47 million barrels of crude each day. The Cities Services portfolio grew with the acquisition of a Belgian chemical company in 1961, construction of a Louisiana butyl rubber plant in 1962, the purchase of copper mining interests in 1963, the operation of 79 liquid natural gas plants by 1968, offshore drilling that produced 100 million gallons in 1968, and bids on several Alaskan oil and gas tracts in 1969.
The majors’ race to control the Alaskan oilfields was launched in earnest a year earlier, in 1968, when the nation’s largest oil discovery was made in Prudhoe Bay on the state’s North Slope. Atlantic Richfield (ARCO, formed by a merger in 1966) and Humble Oil (now Exxon) struck oil on their final planned attempt, while BP had packed up all its equipment after ten years of futility before making its own last-chance strike in 1969. And Phillips Petroleum (see IGM, May/June 2003), which in the 1950s was the first company to gain federal permission to drill in Alaska, at last discovered oil there in 1969.
Back in the lower 48, an advertising copywriter in 1959 coined the “Tiger in Your Tank” slogan for what became (in 1972) the Exxon gasoline brand, while the now-familiar logo the Mobil brand (with the red “O” ) was introduced in 1966 (see IGM, July/August 2005). And Texaco’s “Trust Your Car to the Man Who Wears the Star” campaign kicked off in 1962, ushering in a decade in which the company opened major research centers in Texas (1965) and Belgium (1967), patented new electronic technologies for seismic oil exploration (1969), and participated in construction of the Trans-Andean Pipeline in the Amazon River Basin (1969).
Sunoco also grew its international operations during the 1960s by establishing North Sea Sun Oil Company (1965) and Japan Sun Oil Company (1966), becoming the first company to begin synthetic crude oil production from Canada’s Athabascan oil sands (1967), and building a new refinery in Puerto Rico (1969). Conoco (see IGM, May/June 2003) expanded overseas and, with major offshore finds in Libya and Dubai, sold that oil by creating a retail network in West Germany, Austria, Belgium, Luxembourg, and the United Kingdom; by 1972 the company’s assets exceeded $2.3 billion and encompassed diverse interests in coal, chemicals, plastics, fertilizers and minerals. These two firms, which had once been small regional oil companies, were transformed during the 1960s into worldwide enterprises.
Transition Time for Independents
In 1968 the retail outlets owned by SIGMA members averaged just over 45,000 gallons per month in fuel sales—up from about 39,000 gallons in 1959. But although independent marketers tended to be smaller, privately-branded operations in the 1960s, their business was changing. As they entered the decade, marketing in the early 1960s was still characterized by freebies --free maps, free trading stamps, free drinking glasses—and by price wars. Since supply was abundant, independents got a break at the wholesale racks and could often purchase product at less than the branded jobber price. The majors retaliated by extending competitive price allowances to their jobbers, essentially subsidizing perpetual price wars with independents.
Yet by the end of the 1960s some independents were beginning to brand up, while the emergence of self-service was launching a new era. Even today, company websites can be found across the Internet which tout various marketers for being the first in the 1960s to introduce self-service in their city or state. One example, among many, is Cary Oil Company of Cary, North Carolina (see IGM, March/April 2004). Founded in 1959 as a local home heating oil provider, five years the company added a service station and then in 1967 became first in its state to offer self-service gasoline. Cary Oil even secured the rights to the trade name “Self-Service” as a gasoline brand, though the mark trademark was later rescinded when the state of North Carolina decided that “self-service” had become a generic term.
For the record, the first self-service gasoline station was opened in 1947 by a Los Angeles independent marketer with the slogan, “Save 5 cents, serve yourself, why pay more?” (In the first month, more than half a million gallons were sold.) And history also shows that self-service did not catch on with consumers until the 1970s. As late as 1974, motorists could pump their own gas at only six percent of U.S. stations. But by 1978 the nation’s oil crises had prompted 68 percent of stations to offer self-service.
Nevertheless, the winds of change were first felt during the 1960s as station appearance was transformed. As Independent Gasoline Marketing (October/November 1988) noted at SIGMA’s thirtieth anniversary, “As the 60s began, a new, softer style of service station architecture began emerging. Gone were the stark, box-like porcelain and painted surfaces, and companies began to emphasize state beautification and rehabilitation.”
In an IGM (Fall 1996) panel interview, architect Jim Mitchell noted how “service stations” of the 1940s and 50s were less dependent on location: “Cars had small gas tanks and the highway infrastructure was fairly basic. So the stations just lined themselves up along the two-lane roads where most people did their driving.” Service was the main attraction and, since the economy was good and labor was cheap, consumers willingly drove up and willingly paid. Further, he explained, “Station design was about the oil company and the brand identity,” and those porcelain boxes projected a modernistic corporate image.
“By the 1960s,” Mitchell continued, “with the interstates and expanding highway network, people started not only driving longer distances, they expected to reach their destinations faster. For fuel retailers, that meant location was now an important factor.” At the same time, he added, “Motorists wanted to get on their way, so gasoline marketers started selling food and drinks. That way, customers would only have to make one stop. But c-store owners saw the same opportunity and started putting gasoline pumps in their parking lots.”
The growing consumer desire in the 1960s for convenience, then, created a challenge that was met a decade later by the spread of self-service and the marriage of fuel and food. But architect Coney Elliott pointed out that, still during “the late 1960s and early 70s, gasoline stations and c-stores started doing each other’s business. But facility design still reflected each retailer’s core business. Petroleum retailers might be adding food. But on the street they wanted to project a clean, gasoline-and-service image. By the same token, c-store operators might be installing a gas pump, but not with enough design emphasis to detract from their food business.”
The 1960s, then, were a transitional time for independent marketers. As architect Joseph Bona told the IGM panel, “When c-stores arrived on the scene, stations were mostly retrofitting existing ‘box’ buildings. Design continued to reflect the identities of each gasoline brand.”
Yet as folk artist Bob Dylan sang in his 1964 debut album, “The Times They Are A-Changin’.” As it turned out, the 1960s were the end of a golden era for the major oil companies, while independent marketers were being transformed from auto mechanics and gasoline price warriors into purveyors of convenience to a burgeoning car culture. But then Americans woke up on a Wednesday morning, October 17, 1973, and heard the news that something called “OPEC” had embargoed oil shipments to the United States. The next day, the price of oil went up by 70 cents a barrel—and the nation’s petroleum industry was never the same.
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