By the year 2030, one out of every four fill-ups may be history. At least that’s what John Eichberger, executive director of NACS’ Fuel Institute and vice president of government operations for NACS, told summit attendees.
Describing the trends in the evolving fuels landscape, Eichberger said changing consumer behavior and evolving vehicle technology will contribute to continuing demand destruction in the future, describing millennials and the younger Gen Z consumers as less likely to drive than the previous generation.
Fuel demand in general is down 4%, Eichberger said, citing data from the U.S. Energy Information Administration (EIA), with projections for 2030 putting demand down 22%.
“That’s one out of every four fill-ups that will be unnecessary,” he told the group. He described “fundamental factors” that will influence fuel demand. Here are several key trends:
Vehicle Fuel Efficiency: Vehicles are targeted to average 54 miles per gallon (MPG) by 2025, with the likely number being 45, he said. By that time, emissions in cars are projected to be down by 51%, with light trucks down 45%.
Sluggish Rates of Adoption for New Fuels: Several barriers have inhibited the growth of alternative fuels from being a significant part of the nation’s energy consumption, such as logistical flaws in current regulations, the high cost of technology and even auto dealers who would rather sell a gas-fueled car that’s on the lot than a hybrid that would take two weeks to arrive on order.
Population Shifts: Significant demographic changes such as the rise of women in the workplace and an overall population boom have supported past spurts in gasoline demand. Such trends are no longer on the nation’s horizon.
Younger People Driving Less: Statistically, teenagers and young adults are getting their driver’s licenses later and don’t have the same desire to own and operate a car as older generations do, he said.
In terms of the effect of alternative fuels on the market, Eichberger said significant barriers including regulation, infrastructure and technology have prevented many alternative fuels—everything from ethanol to electricity—from increasing their share of the nation’s fuel consumption.
Eichberger did suggest that hydrogen fuel cell technology is on his radar. That’s because major automakers have committed significant dollars to the development of that technology. In theory, the result would be the ability to power a car in 3 to 5 minutes, allowing that car to run 500 miles and with zero emissions, because the burned-off byproduct would be water.
For as much as retailers typically see government regulation as impeding business, Eichberger said some mandates have actually spurred innovation, especially in biofuels, natural gas and hydrogen, naming carbon-emissions regulation as a clear driver.
“Would some other technology likely come to market and gain more market share without government interference? Absolutely,” he said. “The government is also a major problem for our industry, but if we look at what innovation might take share, it’s tied to [emission mandates].”
Demographics and Demand
Still, innovation will take off only if consumers embrace it. “It doesn’t matter if a car can go 50 miles per gallon—if the consumer doesn’t trust it or market economics aren’t panning out …” Eichberger said. “[For example], hybrid vehicles are still only a small percentage of the market.”
But the more fundamental issue beyond fuel market share is some consumers’ waning love affair with driving. For 100 years, the vehicle miles traveled (VMT) in the United States were on an “unrelenting uptick,” he said. However, that demand pattern has leveled off since 2006 and now is in “the longest period of stagnation” in the country’s history, Eichberger said. The recession may account for part of it, but in past recessions, VMT eventually rebounded. Not this time, though. Job loss can’t account for the flatlining of demand, because historically VMT has grown even during high unemployment, he said.
VMT has tended to follow population trends; for example, a boost came in the mid-1990s with more women entering the workforce. “With the exception of population growth, I don’t see any other significant growth factor other than the increase of women entering the driving pool,” he said. So with population growth and females entering the workforce now leveling off, demand is bound to fall.
The only significant growth in driver’s licenses has been in the 60- to 70-year-old age group, Eichberger said, with all other age segments declining.
While many millennials may experience lifestyle shifts such as getting jobs and needing to travel to work, Eichberger said research shows that if an individual at 19 is used to driving less, that person will have a tendency to revert back to familiar patterns if lifestyle allows for it.
Unfortunately for c-store retailers, that younger generation—the one that’s driving less—tends to like c-stores more than other segments. According to NACS surveys, a younger generation wants non-specific meals and the ability to get in and get out, but they’re not driving as much.
“The 55-and-older group is a primary market for cars,” he said. “They have money and they started the love affair with cars.”
Baby boomers put posters on their walls depicting cars, or of idols such as actor James Dean in a Porsche. “In my day, you got your license at 16; now my nieces and nephews are getting theirs at 19,” he said. “And what about drive-in theaters? Do you have one where you live anymore?”
Reaching this younger customer may be even more of a challenge, given the rise of smartphones and online delivery. “This generation inherited the world where they never have to leave the room,” Eichberger said. “When [they] want to buy something, the go to Amazon, GrubHub and Uber.”
Fossil Fuels Forever?
In terms of how fuels will evolve, Eichberger questioned whether or not technologies such as electric- or hydrogen-powered cars, or alternative fuels such as ethanol, diesel or natural gas, would have a dramatic effect on retailers’ future business. He suggested retailers consider the pace of change, especially regarding fuel.
While the adoption of some technologies have taken off exponentially, internal-combustion vehicles have remained the bulk of the vehicle population, 98%, for 107 years, since Henry Ford put out the first Model T.
“It takes a long time to turn over an industry, to go from concept to reality,” he said.
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