Opinion: 3 Current and Future Fuel Disruptors

CAPE CORAL, Fla. -- Electric vehicles (EVs), autonomous driving or changing consumer demands: Which is the bigger disruptor to fuel retailers?

This question was on the mind of many stakeholders from across the fuel and vehicle industries, who recently gathered in Chicago for the Fuels Institute's Fuels2018 conference. This is the market's premier event for an open exchange of ideas. Having attended every year as a board member, I was truly struck by the diversity of perspective and breadth of topics, not to mention the conference’s traditional lack of biased objectives. (For this year's speakers and presentations, click here.)

There was a very systematic approach to the future of the market. We are heading toward a new paradigm, and this year’s meeting gave it due attention, while ensuring that the energy and vehicles that will dominate during the transition are being evaluated for how they can improve. Attendees returned with a broader understanding of the diverse factors that influence our markets—as well as some new industry perspectives on market disruptors.

Here are some of my takeaways on those current and future threats to fuel retailing.

Photo courtesy of Zol87

The first day of the conference examined issues and opportunities for today and included a panel that addressed octane and internal combustion engine advancements. This is a critical topic, as the Department of Energy’s Co-Optima project looks to create optimized engines that run on a special optimum fuel to achieve Corporate Average Fuel Economy (CAFE) standards.

While this is an appealing way to keep the convenience industry in the liquid-fuel business, the challenge for retailers is how to make that transition if it occurs. Many operators do not have the storage capability today to add another fuel, unless they discontinue carrying one of today’s products or adding storage. There are clearly financial considerations to both strategies, which will require retailers to be very strategic in developing plans and nimble in quickly executing them when the opportunity presents itself. I believe those who take a “sit and wait” attitude will be the ones most harmed when change occurs.

Photo courtesy of Bobak

The next day highlighted developments occurring in the near future, starting with a look at global, federal and state regulations that affect fuel transportation, including those that support the growth of EVs.

My greatest takeaway was that everyone perceives EVs as the solution for both a green future as well as reducing greenhouse gases, and it is being legislated accordingly. That said, liquid-fuel retailers could take solace from learning that there are some significant issues that need to be addressed. The first is that nearly $2 trillion in investments are required for EV infrastructure for India, China, the European Union and the United States, predominantly in power generation and distribution.

The second issue regards batteries: Two very recent studies have highlighted potential supply risks of lithium and cobalt. In the case of lithium, both say that the need for production scale up may not keep pace with demand, which is expected to double by 2025. For cobalt, the issue is that most of it comes from the Democratic Republic of the Congo, which is traditionally war-torn and unstable. 

Photo courtesy of Karlis Dambrans

Another session focused on the most pressing issue moving into this uncertain future: Can the more than 150,000 retail gas stations in the United States evolve to satisfy the emerging consumer or are they destined to be relics of the past? And how might the retail offer change to capitalize on changing market conditions?

In the past, I had been accused of looking at our future negatively, especially when writing about threats to our industry for CSP. But the threat is becoming more real.

In his presentation on c-store design, Joe Bona of Bona Design Lab, New York, argued that we should start thinking about that eventual and inevitable future today, as linear thinking has not addressed the disruption factor. One of his suggestions was to reconfigure the concepts of forecourt and backcourt, and place fuel at the back of the store, as liquid fuels become less of a draw.

Speaking of disruption, the final panel of the event, “Evolution of Mobility Solutions,” addressed the elephant in the room: Consumers are increasing their use of ride-hailing services and indicating their growing interest in on-demand, autonomous mobility. Keep in mind that about 80% of EV charging occurs at home, and there is nothing to stop nearly everyone who is not a c-store from offering that remaining 20% (which will decrease as battery life improves) as the entry cost is low. The bigger concern is autonomous ride-sharing, which will completely disrupt us as an industry.

As I tell my children, one should hope for the best but plan for the worst.

Photo courtesy of Dllu