Vehicle miles traveled (VMT) are expected to grow an average of 1.07% annually through 2035, according to the Federal Highway Administration. Which fuels should a convenience-store offer to meet this increase?
Despite headlines declaring that countries and automakers are moving away from gasoline and diesel engines, the short-term outlook for traditional fuels remains strong. With that in mind, here are five fuels with potential.
1. Gasoline, especially premium-grade. In its 2017 Tomorrow’s Vehicles report, the Fuels Institute projects sales of gasoline will abate slightly by 2025 due to improved fuel economy and increased adoption of alternative fuels. Still, gasoline should remain a fixture on the forecourt for some time if prices don’t skyrocket. As automakers roll out more efficient, turbocharged engines, premium-grade fuel will play a larger role. According to the U.S. Energy Information Administration, increased consumption of premium gasoline has already resulted in increased demand for blending components with higher octane ratings.
2. Diesel. Consumption of diesel, biodiesel and blends will rise as much as 14% through 2025, according to the Fuels Institute. This is largely due to an increase in purchases of heavy-duty vehicles. While the sale of traditional diesel powertrains is expected to drop slightly for the heavy-duty market, diesel hybrid sales are projected to increase, which will more than off set the decline.
Turnover in this sector is slower than in the light-duty market. However, if advancements in the light-duty market prove that alternative powertrain technologies can deliver performance equal to or better than diesel, the commercial sector may begin to adopt alternative fuels more quickly.
3. Higher ethanol blends. Flex-fuel vehicles (FFVs), which run on ethanol blends up to E85, will represent the largest percentage of alternative-fuel light-duty and commercial vehicles until at least 2025, according to the Fuels Institute. This segment could grow by 9% in the next seven years.
While E85 is approved for use only in FFVs, E15 is approved for use in FFVs and conventional vehicles from model year 2001 and newer. The average age of light-duty vehicles in the United States is 11.6 years. IHS Automotive forecasts that the number of vehicles that are new or no older than 5 years will increase 16% by 2021. As such, E15 represents an opportunity for growth.
4. Electricity. Sales of plugin electric vehicles (PEVs) are conservatively projected to increase by 5% by 2025, according to the Fuels Institute. Purchases of PEVs were at an all-time high through the end of June. Automakers are ramping up production to dominate this coveted market, which includes Tesla and its lower-priced Model 3 sedan, plus Nissan and GM.
Costs to develop PEV technologies are dropping while driving range and consumer interest are growing. As c-stores reinvent themselves to become a place where consumers can spend time sipping coffee or enjoying a freshly prepared meal, EV charging stations could attract PEV consumers who value multitasking.
5. Natural gas. Compressed natural gas (CNG) and liquefied natural gas (LNG) offer the most potential for commercial fleets, because other alternative fuels have failed to compete with gasoline and diesel in this sector. LNG provides a higher energy density and requires less storage capacity than CNG, making it more viable as a long-haul trucking solution.
That said, natural-gas vehicles represent only a sliver of the growth potential compared to the prospects of EVs and FFVs, and they are projected to capture less than 0.5% of the market by 2025, according to the Fuels Institute.
Many factors influence VMT data, but one likely cause of the increase is that people are living longer. A growing U.S. population produces a higher number of licensed drivers. C-stores that offer a strategic product mix to meet this growing demand will position their operation for a profitable future.
Joe O’Brien is vice president of marketing for Source North America Corp., Addison, Ill. Contact him at jobrien@sourcena.com.
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