Review of Industrial Organization (2005) 26: 1–25 © Springer 2005
Rationalization of Retail Gasoline Station
Networks in Canada
ANDREW ECKERT AND DOUGLAS S. WEST
Department of Economics, University of Alberta, Edmonton, Alberta, Canada T6G 2H4
Abstract. In Canada, as well as in the U.S., the rationalization of retail gasoline net-
works has been occurring since 1970. Rationalization may be the outcome of a compet-
itive process or a tacitly collusive one. This paper provides a description of how ratio-
nalization has played out in retail gasoline markets in Canada, and particularly in the
Toronto area, from 1991 to 2002. We also consider whether aggregate Canadian data on
gasoline retailing, as well as data from the Toronto area, provide any support for any of
the rationalization explanations.
Key words: competition, gasoline retailing, rationalization, tacit collusion.
JEL Classiﬁcations: L10, L13, L81.
In Canada and the U.S., the number of retail gasoline stations has been
declining for many years. This decline has been referred to as “rationaliza-
tion” in the literature on retail gasoline station competition. In the U.S.,
the number of retail gasoline outlets has declined by 47% between 1972
and 2000. In Canada, the number of retail gasoline outlets has gone from
35,703 in 1970 to 23,952 in 1980, 22,000 in 1989, and 13,250 in 2000.
During the same time that rationalization was occurring in Canada, sig-
niﬁcant oil industry mergers were taking place. In particular, Petro-Canada
was created as a federal Crown corporation in 1975, and it grew, from 1979
to 1985, through a series of acquisitions into one of the three largest gas-
oline retailers in Canada. A further major change in market structure was
Corresponding Author: Douglas S. West, Department of Economics, University of
Alberta, Edmonton, Alberta, Canada T6G 2H4. Phone: 780 492 7646, Fax: 780 492 3300.
E-mail: firstname.lastname@example.org, email@example.com.
See the Conference Board of Canada (2001), the Restrictive Trade Practices Commis-
sion (1986, p. 309), and the Statistical Abstract of the United States, various years.