“The Indiana Petroleum Association, whose members feared the combination of locational convenience and discount prices from cost economies, lobbied the state Fire Marshall who warned of the hazards of self‑service. Effective June 1, 1930, a statewide regulation allowed only station owners or regular employees to dispense gasoline.”
“For a price premium estimated to be between three-to-five cents per gallon, the benefits of Oregon’s longstanding self-service ban are said to be less spillage, less risk of fire, and a trained person ‘to maintain a clear view of and give undivided attention to the pumping process’.”
The rise and legalization of self-service at the service station is one of the longest and most colorful episodes in the history of US oil and gas regulation. Until recently, only New Jersey (1948–) and Oregon (1951–) still had laws making it illegal to offer serve yourself gasoline and diesel. And as of January 1, 2018, New Jersey stands alone.
In Oregon, the new year brought pump freedom to rural areas. Last June, Governor Kate Brown signed legislation that would allow service stations in Oregon counties with 40,000 residents or less (15 of 26 counties) to allow self-service pumps. Back in 1951, this state outlawed self-service in order to create jobs and “as a way to keep older petrol patrons from having to inconvenience themselves at the pump.”
Under the new law, some areas offer 24-hour self-service and others self-serve just at night. Social media has had a field day with some of the reaction from the state’s residents fear of their newfound freedom (see here and here).
For a price premium estimated to be between three-to-five cents per gallon, the benefits are said to be less spillage, less risk of fire, and a trained person “to maintain a clear view of and give undivided attention to the pumping process.” About 9,800 service-station attendants are involved. (For a more thorough examination of the pro/con arguments, see here.)
Fires and spills at service stations from amateur dispensing (you and me) proved to be a false alarm. Actually, it was a contrived false alarm by vested interests against upstarts petroleum marketers with a better business model.
A bit of history follows on how it all began….
Beginnings: Indiana (1930) …
The battle over self-service as an entrepreneurial strategy and a consumer option began 85 years ago. It began in Indiana (1930), was rekindled in California several years later, and spread to many states after World War II. Indiana’s story is below.
“Safety” regulation appeared in a different form beginning in 1930 in Indiana. The governmental action was prompted by the successful opening of two self‑service stations, with 18 more planned, by an aggressive state marketer. This novel approach to gasoline dispensing was watched by the whole industry.
The Indiana Petroleum Association, whose members feared the combination of locational convenience and discount prices from cost economies, lobbied the state Fire Marshall who, in highly publicized testimony, warned of the hazards of self‑service. Effective June 1, 1930, a statewide regulation allowed only station owners or regular employees to dispense gasoline.
The self-service chain challenged the regulation in court and publicized the fact that safety equipment was kept on the premises, as opposed to garages, barns, and yards where legal self‑service regularly was performed. The regulation would stand, however, and a revolutionary form of gasoline marketing with the potential to form a competitive fringe with tracksiders ‑ the two stations were averaging a car per minute and saved motorists 20 percent off the full service price ‑ was nipped in the bud.
It would not be until after World War II when self-service marketing would make a comeback and neutralize “safety” regulation to gain a foothold.
… to California (1947)
On May 1, 1947, a large self-service operation opened in California that received wide publicity and reawakened entrepreneurs to this particular form of discounting. Amid music and attractive girls on roller skates making change, the multi-pump station was jammed with customers and sold 570,000 gallons in its first month. Its success would inspire several small self-service chains on the outskirts of cities with unfriendly ordinances.
The attractions of pump-yourself stations were many. Compared to established dealers, self-serves offered price discounts, high volume (self-serves were the first multi-pump stations), novelty, convenience (generally 24 hours), reduced wait (averaging 2 minutes per car), safety (automatic shut-off nozzles, enforced rules), attractive and spacious layout, and glamor (roving female cashiers).
In early 1948, dealer associations began to recognize self-service as a potential trend and sought new legal barriers to supplement those from the 1930s. A survey in August 1948 showed self-service to be illegal in nine states – Illinois, Indiana, Louisiana, Maine, Michigan, Ohio, Oregon, Pennsylvania, and Tennessee – and in many cities and towns in California, Idaho, North Dakota, and South Dakota. Four other states were poised to pass prohibitions should self-service appear.
By year end, self-service stations were operating across the country, predominantly in warm weather areas. An estimated 5 percent of gallonage sold in the Los Angeles basin was self-serve, flourishing from prices from $0.02-$0.05 per gallon lower than full service prices around $0.23 per gallon. Failing to win a state ban, organized full-serve dealers in California found success at the local level.
In September, Los Angeles banned self-serves, and the city Attorney General questioned the legality of price discount signs under the Business and Professions Code of the State of California. Under seige was the familiar “Save 5¢/gal.” advertisement of many self-serves, which was a key merchandizing line to attract motorists. Citations followed, although disrespect and circumvention kept the discount claim before the public. One chain renamed itself “Save 5 Gasoline” to continue to advertise as before.
In 1949, conventional-station dealer groups lobbied for state and local bans – or at least as much “safety” regulation on self-serves as possible to nullify their cost advantages. But counter-forces began to challenge full-service protectionism – the pro-consumer American Automobile Association, the open-minded National Petroleum News, opportunistic state and local politicians, the self-serve association, Self-Service Gasoline Stations Association, insurance companies, several major city fire marshals, and several major company executives.
But this was not necessarily enough against well organized veteran dealer groups. Labor unions such as the Teamsters’ Union were also opposed to any reduction in “retail clerks.” State bans were enacted in New Jersey and Minnesota; city bans were enacted in Nashville, Tennessee, Baltimore, Maryland, Norfolk, Virginia, and five Washington State cities, among others; and strict regulations were placed on Wisconsin self-serves. An API resolution against self-serves in March 1949 added impetus to these measures, although dissent within the trade group led to a recommendation of approval later in the year.
Fighting Back ….
In California, sentiment turned toward a free market in gasoline dispensing. Localities rejected bans, mandatory night closing, and pump maximums per station. (Self-serves were typically 24-hour and multi-pump, explaining the legislative intent.) One successful harassment in the state was a sign law, effective September 24, 1949, that prohibited words such as “discount,” “save,” “off,” “less,” and “below” unless the full price and its components for each gasoline grade were in equally large lettering.
Literally thousands of citations were given by enforcement personnel. But recalcitrant self-serve operators vowed to go to jail if necessary to advertise as before.
The spread of self-serve prohibitions continued to slow in 1950. Protectionist attempts were blocked in New York State, Washington, D.C., and other cities and towns. Bans, however, were enacted in Massachusetts and several scattered towns.
In free market areas, self-serves multiplied. On the West Coast alone, over 400 stations were in operation. With this growth came internal competition – head-to-head rivalry between self-serves – and external competition – conventional marketers reducing margins, adding pumps to achieve scale economies, and opening self-serves themselves. The competitive challenge from streamlined full service was most felt. Fill-up time was reduced with more bays, and the price gap was narrowed to $0.01-.02 cents per gallon.
To many, particularly women, full-serve was worth it. Self-serves also began to stock oil and other TBA items, offering premiums, and experimenting with partial service. Decreased gallonage and price wars strained self-serves and caused attrition, and complaints were made by these dealers to the Justice Department about a major company conspiracy. No party, no matter how victimized by regulation, was above politics if a business emergency was encountered.
In 1951, the number of self-serves declined, and many survivors were forced to experiment to expand their niche. Conversions to full service were common, and many self-serves offered partial service to maintain gallonage. The success of self-serves increasingly depended on location and management. Political barriers to entry in most of the country and regulatory-induced costs remained the most important problems, but market factors also limited self-service.
For the time being, self-serve would be a specialty, not mass, form of gasoline marketing.
Source: Robert Bradley, Jr., Oil, Gas, and Government: The U.S. Experience(1996), pp. 1327, 1440–1443.