How do consumers feel about diesel? What price of a gallon of gasoline will make consumers change their behavior?
John Eichberger, NACS’ vice president of government relations and executive director of the Fuels Institute, walked attendees of his “Future of Fuels” educational session through what our industry is learning about the fate of fuels at retail through a variety of metrics.
Determining how the fuels market will shake out in 20 to 30 years will also mean understanding consumer feelings about current economic conditions, he said. To do this, NACS has commissioned a monthly Consumer Fuels Survey for more than a year that examines how gas prices affect consumer sentiment.
Eichberger pointed out that buying gas is not a logical decision— it’s emotional. “Nobody likes to buy gas, but we have to do it,” he said, citing 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 5 minutes out of their way just to save 5 cents per gallon. (See chart at end of story.)
The NACS surveys show that gas prices have a great effect 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 changed 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,” he said. “At some point, if [gas prices and consumer sentiment] intersect, alternative fuels will have the best chance of gaining market share.”
In Eichberger’s opinion, the trigger point at which consumers will change behaviors will likely change in conjunction with fuel prices. In other words, as consumers grow accustomed to paying higher prices for fuel, the price at which they would drastically change behavior will also go up—although perhaps not at an equivalent rate. If this is true, it will slow the rate of adoption of alternatives.
Seeking Alternatives?
Meanwhile, diesel fuel, according to a May 2013 survey, continues to pose challenges relating to consumer adoption. Sixty-nine percent of customers said they wouldn’t consider diesel as a fueling option. The irony, Eichberger said, is that even though in 2013 diesel fuel averaged 12% more than regular gasoline, diesel engines deliver 15% to 40% higher efficiency when measured as miles per gallon. Simply put, diesel vehicles can deliver better miles per dollar, but because of the cost of diesel vehicles and the perceived higher cost of diesel fuel, the fuel simply isn’t resonating with consumers.
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 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.
Despite the strong promotion of alternative- fuels vehicles by the government and advocates, the forecasts do not indicate a significant capture of market share over the next 25 years. According to U.S. Energy Information Administration (EIA) forecasts, electric vehicles (those that require recharging from the electricity grid) are projected to capture no more than 1.3% of the light-duty-vehicle market by 2040. Similarly, natural-gas vehicles are forecast to represent only 0.17% of the market, although Eichberger believes this forecast is understating the potential development of the natural-gas economy. He explained that forecasting vehicle inventories for a powertrain that is driven primarily by aftermarket conversions is extremely challenging and that the EIA could be underestimating the rate of these conversions.
Retailers can also expect government regulations to continue playing a significant role in the types of fuel sold on their lots, such as the federal Renewable Fuel Standard (RFS). The mandated 36 billion gallons of biofuels blended into the current fuel supply by 2022 is simply unachievable, Eichberger said. 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.
In response to a question about what retailers should do now to prepare for tomorrow’s consumers, Eichberger advised considering equipment that meets the highest level of fuel compatibility. He explained that designing a facility with options and the ability to accommodate new fuels and equipment can save money in the long run and provide the retailer with an advantage in capturing developing markets.
Consumers Focused on Price
According to a January 2013 consumer survey, two-thirds of consumers shop by price, and two-thirds will go out of their way to save 5 cents per gallon.
| To save 5 cents per gallon, consumers would: | Strongly agree | Somewhat agree | Potential defections |
| Pay with debit card | 49% | 29% | 78% |
| Pay with cash | 44% | 32% | 76% |
| Turn left across busy street | 33% | 34% | 67% |
| Drive 5 minutes out of the way | 26% | 40% | 66% |
| Drive 10 minutes out of the way | 14% | 25% | 39% |
Source: NACS
Diesel Value Case Study
69% of consumers say they won’t consider diesel as a fuel option. Here are their reasons:
▶ 10% Diesel pumps are dirty
▶ 13% Lower performance than gas vehicles
▶ 16% Hard to start on cold days
▶ 18% Require more maintenance than gas engines
▶ 30% Harder to find fuel
▶ 33% The type of vehicle I want doesn’t use diesel
▶ 36% Diesel engines are noisy
▶ 37% Smell/fumes from diesel exhaust
▶ 38% Diesel vehicles are more expensive
▶ 54% Diesel is more expensive
Source: NACS
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