The Impact of Decontrol on Gasoline Wholesalers and Retailers

Abstract

Since decontrol of the U.S. gasoline market in January 1981, substantial changes in operations of gasoline retailers (dealers) and wholesalers (jobbers) have occurred. This paper analyzes decontrols impact on the operations of these two classes of firms. A primary conclusion is that removing regulations allowed dealers to profit by cutting prices and margins for self-service gasoline, while increasing prices and margins for full-service gasoline. In addition, decontrol resulted in lower jobber margins and profitability, which in turn caused a substantial number of jobbers to exit from the market. Overall, removal of the regulations allowed operational changes which were consistent with emerging technology and consumer demands, but which had been constrained by a decade of pervasive federal regulation of the U.S. gasoline market. Thus, decontrol fostered greater economic efficiency in the marketing of gasoline, which contributed to lower gasoline prices during a time of rising gasoline taxes and increasing general inflation. Copyright 1985 Western Economic Association International.