Department of Energy practices and the actions of major oil companies have been a factor in forcing more than 30,000 small gasoline retailers out of business since 1974, about 7,500 of them within the past six months, according to a Small Business Administration report released this week.
The department's gasoline allocation system is cited in the report as the primary culprit. The report said the system is confusing, discriminates against small outlets and effectively is manipulated by the big refiners to make it impossible for independent retailers to compete.
The report was prepared by the SBA's Office of Advocacy. Its conclusions were based largely on the complaints of small independent petroleum marketers, including retailers and jobbers, voiced at hearings in Los Angeles in June, at the height of California's gasoline crisis.
"Major company markering practices and DOE regulations appear to be functioning as two millstones grinding small business into a smaller and smaller share of the distribution market," SBA lawyers said in a cover letter to Energy Secretary James R. Schlesinger.
"The continued deterioration of the small business sector of the petroleum distribution industry and the death rate of small firms in it are intolerable," the letter said. "If the outlook for small business in this country is not to be darkened further by the energy situation, we are clearly going to have to do much better than we have done and to do it very quickly." The letter was signed by Milton D. Stewart, SBA chief counsel for advocacy.
A DOE spokesman said he was not in a position to comment on the report because he had not read it. He suggested, however, that recent revisions in DOE regulations - among other things, increasing the profit margins for retailers - may have answered some of the SBA criticisms.
The basis thrust of the SBA report was the DOE, through its policies and the implementation of those policies, has crippled small dealers.
The DOE regulations "are so complex they are incomprehensible," the report said. Pricing regulations are enforced vigorously against the small dealer, who is easier to tackle, while "DOE is incapable of completing an audit of major refiners."
The substance of the regulations "unreasonably limits an independent retailer's market flexibility," the report said. "The retail dealer," for example, "cannot adjust his profit margins as much as a wholesaler can in times of shortages."
DOE has cut back allocations to small dealers "arbitrarily" by as much as 50 percent, it said, placing marginal service stations in a situation where "the decreased volume simply will not support the business."
The department also allows the major refiners to "continually discriminate" in their allocations to independently owned stations, which the report said sometimes get "as little as 40 percent of their allocation while refiner-operated stations are simultaneously getting 85 percent of allocations in tight supply periods."
"One retailer claimed that the large oil companies have used the complexity of DOE regulations, and the fact that DOE personnel do not fully understand the regulations or the industry, to totally dominate the retail sector and to cut out service station dealers who do not do as they are told," the report said.