Trigger points on fuel, attitudes toward diesel shape future of fuels industry
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.
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.