Small Players in Big Oil
This is an essay from an economics course uploaded on September 29th, 2026
The oil industry is an industry typically viewed as only having a few large companies, yet the oil industry includes around 200 independent firms in the state of California alone (Douglass). Cosby oil is one of those companies and the focus of the Los Angeles Times article: “Cosby Oil Thrives Alongside Big Rivals.” Cosby oil is one of the independent firms that found a market niche of film studios, hospitals, and oil change centers to remain profitable in an oligopolistic oil market (Douglass). The firm also sells gasoline to corporate fleets and independently owned gas stations. Large oil firms, such as Chevron and Exxon, dominate the large retail market, but leave specialty markets open to smaller firms like Cosby oil. This exposed market contains high levels of customer loyalty and clients who focus on services rather than prices. The way these small firms gain clients from their competitors is by offering a service their current provider does not have or does not do well. The appeal of Cosby is their use of the cardlock system, a system which requires fuel cards in combination with special codes for fuel purchases. The cardlock system is used on sites that do not include mini-marts, something that tends to delay drivers. Despite the successes of Cosby Oil and its ability to post annual revenues higher than $20,000,000 using just 60 employees, the owner may sell the firm if the next generation does not want to partake in the business.
The oil selling industry is an example of an undifferentiated oligopoly. Firms try to differentiate their products through the services offered with the product. The costs are increasing in the oil industry, but that has little-to-no effect on small firms like Cosby Oil (Douglass). The demand of oil by their clients is inelastic, so prices have no effect on sales. The services offered are what dictate sales and the industry is cut-throat for clientele resulting in a coordination game where each firm uses the same strategy. In the example from the article it is stated that each firm has a niche in which they operate. Within each niche there are a few firms competing with each other for clients. The strategy used by each firm is to specialize in services as a way to increase the incentive for a client to switch brands. Cosby Oil keeps a close relationship with its clients and does its best to purchase fuel at the lowest price possible.
A change in the rules of the game also helped Cosby Oil survive as a small firm in an oligopoly. Environmental laws in California created Cosby’s largest market. Because the law required fuel tanks to be stored underground, many businesses had to remove their private on-site tanks. The change in laws gave Cosby and similar firms the opportunity to enter the fleet fueling business through self-serve stations.
The article examined, “Cosby Oil Thrives Alongside Big Rivals,” is one that shows how small firms are able to survive in markets dominated by giant firms. The large barriers placed by existing large firm keep competition away, but those willing to take advantage of legislative changes and pay close attention to their client’s needs may break through those barriers if they find the proper niche.
Works Cited Douglass, Elizabeth. "Cosby Oil Thrives Alongside Big Rivals." Los Angeles Times. Los Angeles Times, 03 Feb. 2003. Web. 21 Oct. 2012. http://articles.latimes.com/2003/feb/03/business/fi-cosby3.