Fueling Tomorrow’s Vehicles

NACS State of the Industry Summit education session explored several areas of the future of fuels, including consumer behavior and preferences, recent market trends and the role of the government.

April 04, 2014

CHICAGO – What the future holds for the convenience and fuel retailing industry in the motor fuels arena continued to be explored at this year’s NACS State of the Industry Summit.

John Eichberger, NACS vice president of government relations and executive director of the Fuels Institute, walked attendees at Wednesday’s “Future of Fuels” educational session through what our industry is learning about the fate of fuels at retail through a variety of metrics.

He shared that determining how the fuels market will shake out in 20 to 30 years will also rely on understanding consumer feelings about current economic conditions. To do this, for more than a year NACS has commissioned a monthly Consumer Fuels Survey that examines how gas prices affect consumer sentiment.

Eichberger commented that buying gas is not a logical decision — it’s emotional. “Nobody likes to buy gas, but we have to do it,” he said, noting that consumers have no real control over the price at the pump. The monthly NACS surveys continue to show that price is the top indicator for determining how consumers shop for gas: Two-thirds of consumers would drive five minutes out of their way just to save five cents per gallon. 

The NACS surveys show that gas prices have a great affect on consumer sentiment about the economy, but the bigger question is at what price point will consumers actually change their behaviors, whether by driving less or purchasing an alternative fuels vehicle?

In 2008, consumers were changing their behaviors when gas neared $4 a gallon, said Eichberger, questioning whether that was still the trigger point for consumers. The answer, he said is that the trigger is now sitting near the $5 per gallon range. “I believe as retail prices goes up, we’ll see the trigger point move as well — at some point if these two lines [gas prices and consumer sentiment] intersect, alternative fuels will have the best chance of gaining market share.“

In terms of what types of vehicles consumers will be driving, a recent Fuels Institute report, “found that gasoline-powered vehicles would drop from 93% of the light duty vehicle market in 2012 to about to just around 82% in 2023, which is almost a 10% drop in gas-powered vehicles coming to convenience stores to fill up. Two reasons for gasoline’s loss in market share are fuel price and manufacturing of more fuel-efficient vehicles to meet Corporate Average Fuel Economy (CAFE) standards. Meanwhile, long-term market trends for the types of vehicles consumers will purchase by 2040 point to gasoline, diesel and flex-fuel vehicles.  

Retailers can also expect government regulations to continue playing a significant role in the types of fuels sold on their lots, such as the federal Renewable Fuel Standard (RFS). Eichberger shared that the mandated 36 billion gallons of biofuels blended into the current fuel supply by 2022 is simply unachievable. And although the U.S. Environmental Protection Agency has reduced the mandate for 2014, the agency won’t release the final requirement until this June.

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