See also: Design and construction of filling stations,  Peculiarities of LHG filling stations design,  Peculiarities of filling stations design

Motor fuel market in Russia. History and prospects

History of filling stations as specialized “fuel” shops has begun since 1907 when in Seattle the company “Standard Oil of California” (current name is “ChevronTexaco”) opened the first filling station. The first filling stations were mixed hovels with fuel puncheons and hand operated pumps. Nevertheless the owners of such filling stations were quick to understand that a further business development and a victory in a rising competitive activity was not possible without a standardization and marketing policy, that is why since the 20’s of the last century filling stations have begun introducing unified business standards of filling stations corporate design by means of bright and catchy logotypes of the owners and unified service centers.

The 20’s of the last century saw the first mechanical hatching columns and in the 30’s the world witnessed electrical batch meter columns. The first petroleum pump emerged in 1927 in Hamburg. In the 30’s in Germany one could fill with petroleum mainly by means of petroleum pumps which stood on the pavement directly and operated assisted with a pump. In common parlance they were called “iron maidens” . Petroleum had been sold but in pharmacies, perfumeries and haberdasheries before. Yet large-scale filling stations have been a rarity in Germany for a long time. It was not until the 50’s that the so-called “era of economic miracle” began and the number of filling stations greatly increased.

The first filling stations in Russia emerged as early as in 1911 when the Imperial Automobile Society entered into a treaty on “Petroleum stations” with the joint stock “Brothers Nobel”. By 1914 in metropolises there have already been 440 stations of this kind. The development of the filling stations network is directly related to the transport system development. In a pre-war period there wasn’t much of automobile transport which was mainly state. Of course there were some cases when veterans and foremost workers got cars as a reward. But it was so uncommon that this fact could not have much impact on statistics. Post-war years saw a lot of trophy cars, moreover a domestic car “Pobeda” was issued, yet there was little of private transport in the USSR. The situation hasn’t changed even when the cars “Moskvitch” and “Volga” appeared. Accordingly the filling stations network was less-developed too but it quite met the demands of a relatively small range of soviet car parks. All oil products supply enterprises (extractive, refining, oil depots, pipelines, filling stations) were united into a state “monster” under the headline “National Committee on oil products”. In the 60’s domestic oil industry turned out gasoline 66 octane, gasoline 72 octane, gasoline 76 octane, diesel fuel oil. There was no payment in cash at filling stations then - just a coupon system. Coupons were of two types: state coupons (for a state motor-vehicle transport) and unified market-based fund coupons (for private car owners). State coupons were distributed directly to state enterprises. Each enterprise had a strictly monthly limited access to fuel which was prohibited to exceed. If an enterprise required more fuel than the standards stipulated –one had to go cap in hand to Gossnab (USSR State Committee for Material and Technical Supplies) officials and humiliated begging for the additional fuel resources. In the meantime fuel prices were ridiculously low:7-9 kopecks per liter. This is an irony of a planned economy. State enterprises were to pay for fuel supply three times per month: on 1, 11, 21 days strictly. Private motorists filled by means of the unified market-based fund coupons which in their turn they bought in shops along with consumer goods. They had an unlimited access to fuel.

Construction of petroleum pumps and oil manufacturing enterprises was realized in accordance with the branch development state plans. In cities filling stations were built near motor transport or large manufacturing enterprises, in provinces - along main transport routes. All filling stations were dependent on tank farms which provided them with fuel. Oil refineries delivered fuel to tank farms. It was only Moscow and Leningrad which had filling stations subordinated to self service plants. One can say for sure that there were two such factories not only in the USSR but in the whole world and for this reason they were worth getting in the Guinness World Records. In the mid 1960’s there were about 250 filling stations in Moscow and 115 filling stations in Leningrad.

A great impulse in development of the filling stations network in the USSR was an issue of the mass popular car “Zhiguli” at a Volzhsky auto plant built in Tolyatti in 1970. “Zhiguli” was filled with gasoline 92 octane whereas a state transport still used gasoline 72 octane, gasoline 76 octane (gasoline 66 octane had come out of usage by then). Gasoline 92 octane was more expensive – 20 kopecks per liter. Nevertheless a fuel coupon payment system didn’t undergo any transformations. Moreover at the filling stations for state transport there was no envision for private cars, any violation was punishable by the police. There were special coupons for the cars coming to the USSR from abroad. The point was that by that time foreigners had already used gasoline 95 octane which was not wide-spread in the Soviet Union yet. Therefore there were coupons but for gasoline 95 octane and they were designed for foreign-made cars only. Apart from the special coupons for foreign tourists there were also special filling stations where they could fill. When entering the territory of the USSR foreign drivers were given a list of filling stations used gasoline 95 octane. The very filling stations for foreign transport were under watch and ward of the authorities. They were more well-organized compared with the other ones, the staff selection was more careful. Each spring such filling stations were inspected by Moscow high authorities who checked thoroughly the readiness of a filling station for a regular season.

Fuel-dispensing units (FDU) for filling stations were mainly of soviet production, a few of them were imported from fraternal Czechoslovakia. The first fuel-dispensing units were dial-indicating: as if it were a clock the indicator needle measured portions - 5 liters of fuel (and it was a minimum filling volume). The filling stations of this kind cannot practically be found anywhere now – they can just be seen in soviet films, such as, for example, “Queen of the petroleum pump” (“Koroleva benzokolonki”). They were replaced by roller fuel-dispensing units: they had figures showing the quantity of the fuel dispensed and turning on rollers. These filling stations measured every liter (accordingly a minimum fuel dispensing volume was the same). They do still exist at some old filling stations in the upcountry.

A fuel coupon payment system began to show signs of strain in the very early 1980’s. At that time in the run-up to Moscow Olympic Games about 20 Moscow filling stations began using payment in cash only. Finally a fuel coupon payment system failed in the fervor of “Perestroika” – in early 1990’s. State coupons and unified market-based fund coupons were cancelled. But then another problem emerged: if a private car owner could easily fill using cash, what should one do with a state transport – providing a driver with cash was not to be, was it? The solution was quick and simple: coupons came into usage anew but since that time they have got another name - “service subscriptions”. And as for the so-called division into filling stations with a state transport filling and those for ordinary car owners – it disappeared completely. 

The first private filling stations started to emerge in the early 1990’s. It was mainly so-called container filling stations which had an elementary set of equipment most required. Moreover they were often built even without a design and estimate documentation, execution of state technical and ecological examination – to say nothing of imposing requirements on architecture and corporate design. 

When the first filling stations of a new type began appearing the distribution of construction sites for filling stations had a spontaneous character. Fuel market operators selected the construction site and received all the permits on their own. Not all the market participants liked such a market development.  “You build a filling station, find clients and out of a sudden some nimble entrepreneur erect their filling station close by you. As a result you lose half of your clients” – such complaints can be heard from the owners of the fuel stations already existing. That is why the leading fuel companies in metropolises turned to paying more attention to the idea of the planned construction of filling stations in the city. 

Nowadays a motor fuel market in Russia continue maturing. And whereas in Moscow and Moscow vicinity a filling stations network was formed for the most part (at present in Moscow and in its region it’s about 1600 filling stations) and one can expect their technical improvement and extension of functions, in other Russian regions the procedure of branching network filling stations organization is still in progress (currently there are about 45 000 filling stations in operation in Russia). Competitiveness in fuel business is extremely intense but filling stations sprout like mushrooms after the summer rains and this means that for a private entrepreneur it’s a profitable business. 

The main directions in development of the filling stations network correspond with the world ones. This situation is determined first of all by the western companies “attack” which tend to practise an  aggressive strategy of penetrating to the Russian market. As in all the developed countries in Russia the main direction in the filling station business development was a creation of multipurpose complexes ensuring clients service in accordance with the best world standards. However the current situation at the Russian retail market is specific and this fact has a definite impact on the filling station business strategy in its turn.

For instance, in differ from the western markets where qualitative characteristics of a fuel sold are almost identical and do not depend on definite suppliers, in Russia one of the main competitive factors is a quality of fuel. A wide spread of relatively expensive foreign-made cars sensitive to fuel quality predetermines a special attention which their owners pay to the selection of a filling station. In a psychological sense vertically-integrated oil companies network stations and those of large and famous retailers are more preferable. Their fuel quality is considered to be higher. That is how a brand factor results in a high market value.

At present a lot of petroleum sellers consider that a favorable filling station placement and its technical equipment can not guarantee a stable profit. That is why the so-called franchise is so popular. A little filling station owner when using a brand of some famous oil company increases their sales As the experience shows when the LUKOIL takes some company under its wings – it brings about increase in petroleum sales twice as much at an ordinary private filling station. 

Franchise agreement is not expensive for a filling station owner. In fact it’s a payment for the use of some famous trademark. You won’t have to do anything else at first. But you can get a proven quality petroleum in return. Of course if it’s possible due to the geographical factors. When choosing a patron firm first of all one has to inquire if there is a tank farm or an oil refinery belonging to it nearby. Otherwise there could be a high-quality fuel supply bottleneck. 

One should take into consideration that with franchise agreement execution a firm will require a further concordance with its brand style. According to the large companies it brings about increase in a filling station competitiveness. For example, the Lukoil issued a whole booklet with the recommendations on use of a brand style for the filling stations collaborating with it. This booklet contains a detailed information: what size and colour the signboards should be, what uniform the staff should wear, what high the flags should be of and even how to dispose the litter-boxes. That is why the owners have to rearrange filling stations in accordance with the definite standards. This rearrangement can be rather expensive. In order not to waste money one can begin erecting a filling station in some firm particular manner since the very beginning. 

On the whole one can come to the conclusion that hence there isn’t still many filling stations in Russia and a motor fuel market goes behind the developed countries, at present there is a necessity of placing new filling stations and complexes to ensure retail fuel sales and to provide with a service system  in cities and along the roads of different configuration. 

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Photo gallery (old soviet and foreign stations, corporate design of filling stations)

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