How Today's Emotions Will Fuel Tomorrow's Vehicles

SOI session explores consumer behavior, preferences, market trends, role of government

Published in CSP Daily News

By 

John Eichberger

ROSEMONT, Ill. -- Determining how the fuels market will shake out in the next 20 to 30 years will rely on understanding consumers' feelings about current economic conditions, said John Eichberger as he walked attendees at Wednesday's "Future of Fuels" educational session at the 2014 NACS State of the Industry (SOI) Summit through what the convenience store industry is learning about the fate of fuels at retail through a variety of metrics.

For more than a year, the National Association of Convenience Stores has commissioned a monthly Consumer Fuels Survey that examines how gasoline prices affect consumer sentiment.

Eichberger, vice president of government relations at NACS and executive director of the Fuels Institute, 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 to save five cents per gallon.

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 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," he said.

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 (EPA) has reduced the mandate for 2014, the agency will not release the final requirement until this June.

For more from the National Association of Convenience Stores' 2014 SOI Summit in Rosemont, Ill., see Related Content and watch for additional coverage in CSP Daily News. CSP Business Media is the exclusive media partner of the event.