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.