Price war amid gas station glut spurs shakeout

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If gas stations in Japan were required to be strategically located like polling stations — one within walking distance of every voter — then theoretically, due to their similar numbers, a car wouldn’t be needed to get to one.

Filling stations totaled 50,067 as of the end of fiscal 2003, according to the Natural Resources Energy Agency. This compares with the roughly 53,000 voting stations for national elections that local governments are obliged to set up so every voter can reach one on foot.

Gas stations, however, are disappearing amid deregulation and stiff competition.

If the number of gas stations a nation has were based merely on simplistic geographic terms, and not on population or number of drivers, it would seem Japan has a high concentration.

Germany, roughly the same geographic size as Japan, but with some 40 million fewer people and a proportional two-thirds as many cars, had 15,971 service stations in 2002, or a third of the Japanese number, according to the Petroleum Association of Japan.

But the stiff competition in Japan is leading to a shakeout in the industry.

Gasoline products in Japan, long protected through such measures as import restrictions, had been highly profitable until deregulation started in the mid-1990s.

Takamitsu Kurosaki, head of research and planning at the National Federation of Petroleum Associations, said oil companies rushed to expand their gasoline retail networks in the 1990s ahead of the 1996 lifting of import restrictions on cheap gasoline.

After peaking at 57,653 service stations in 1995, the number has since been rapidly falling, mainly due to price competition.

The NFPA predicted in a March report that a worst-case scenario would see 20 percent of service stations disappear in the next six years due to the cutthroat competition.

Ryo Inomata, manager of a gas station in Tokyo’s Akasaka district, said the worst-case scenario sounds probable for him and his company.

Anzen Sekiyu, the company Inomata works for, had around 30 service stations in the Kanto region five years ago; now there are only 21, three of which have been converted into self-service stations.

“Since the bubble burst (in the early 1990s), everyone has reached the end of their rope,” Inomata said of the industry. “There are too many gas stations. The number will decline as predicted. It has to.”