“Gas wars” - Business in United States of America
Definition: Price-cutting competitions that develop among gas stations, typically when global oil prices are high, as stations try to attract customers
Significance: “Gas wars” have occurred many times throughout American history; one of the most memorable such times was during the 1970’s, when oil prices began to rise as a result of economic and political strife. That gas war eventually ended with oil prices stabilizing, but gas wars continued to be a part of American life throughout the 1980’s and reappeared during the early years of the twenty-first century.
Since the invention of the automobile, the United States has become increasingly dependent on oil for fuel. When the United States began searching for oil resources outside its own borders, American consumers were forced to adhere to global oil pricing that was out of their control. At times, when global prices are too high, America’s fuel stations start “gas wars” to lower prices for consumers and draw business away from their competitors.
One of the largest American gas wars began during the economic recession of the 1970’s, when the Organization of Petroleum Exporting Countries (OPEC) lessened oil production to raise prices in response to poor relations in the Middle East and with the United States. The higher oil prices led to oil shortages in the United States, and a gas war began as a method of bringing more customers to the gas pumps. The “war” escalated as gas stations continued to lower their prices until they could set them no lower without causing the station owners to lose money. In the end, the owners were forced to raise their prices, and consumers were forced to pay nearly the same or more than they had before the gas war.
The end of the gas war during the 1970’s did not signal the end of gas wars altogether. Throughout the 1980’s, small-scale price competitions occurred between gas stations in different regions of the United States, but a gas war as large as during the 1970’s did not occur again until the early twenty-first century. The war in Iraq, natural disasters such as Hurricane Katrina, and a declining economy all contributed to the return of the gas wars in the United States. Once again, Americans were struggling to gain access to affordable fuel, and gas stations began to compete for customers. However, as was true during the 1970’s, the gas wars did not offer a great deal of relief to consumers, and gas stations were ultimately forced to raise their prices again.
Castanias, Rick, and Herb Johnson. “Gas Wars: Retail Gasoline Price Fluctuations.” The Review of Economics and Statistics 75, no. 1 (1993): 171-174.
Fleming, Harold M. Gasoline Prices and Competition. New York: Appleton-Century-Crofts, 1966.
Savoye, Craig. “Gas Wars: Mini-marts Fend Off Wal-Mart.” Christian Science Monitor 93, no. 141 (2001): 1.
See also: Arab oil embargo of 1973; automotive industry; Drive-through business’s; Energy crisis of 1979; Petroleum industry; trucking industry.