Shifting U.S. mobility has gas stations making moves
As electric cars threaten fossil fuels, convenience store owners turn to Amazon lockers, fast food
Roll up to a Sunoco station in Houston and you may notice a relatively new offering. Not a new type of gasoline or deal on Coca-Cola, but an Amazon locker to keep your packages safe from porch pirates.
At a Sunoco station on Gessner
Road in Houston, store manager Gabriel Blalock said the Amazon locker is one of several products and services the station’s owners are trying to keep gas station and convenience stores busy.
“It definitely increases foot traffic,” Blalock said. “Some (customers) just go get the package and get in their car and leave, but some of the regular customers I know, they come in and get their food and drinks first, and
then go to the locker.”
Although Amazon lockers at gas stations are still unusual, they represent one of dozens of new strategies gas station owners are experimenting with as they plan for a future of diminishing fuel demand as cars become more fuel-efficient and electric vehicles more prevalent. More gas stations are expanding food offerings to compete with fast food chains and some are adding electric vehicle charging hook-ups alongside the gas pump.
Analysts say thousands of gas stations are at a risk of closing in the next 20 years as electric vehicles, autonomous cars and ride sharing increasingly push down demand for gasoline. A new report from the consultancy firm Boston Consulting Group estimates that up 60 to 80 percent of gas stations are at risk of closing by 2035 if they don’t take serious measures to change
their business models.
Boston Consulting Group didn’t extrapolate its projections to estimate the number of gas stations that would close. But applying their metric to the 2,559 gas stations in Houston, that means 1,500 to 2,000 stations could be unprofitable in the next 25 years.
Tony Portera, managing director of Boston Consulting Group in Dallas, said the 60 to 80 percent closure estimate represents an extreme scenario that would happen only in markets where electric vehicles and autonomous vehicles catch on in the next two decades. But even in a scenario in which fossil fuel cars still dominate, Boston Consulting Group projects between 25 to 30 percent stations will be at risk of going out of business as profits collapse.
“We’re likely going to have a lot of closures,” Portera said.
“The ones that evolve and change will be able to survive.”
Stations could disappear
Gas stations are facing a threat to their business models as American mobility is in the middle of a fundamental transformation, analysts say. By 2035, a quarter of the American car fleet will have some form of electric engine under their hood, according to estimates from the Boston Consulting Group. By then up to a third of all new car sales will be partly or fully electric.
The rise of self-driving cars could accelerate that trend. Boston Consulting Group estimates that by 2035 nearly 25 percent of new cars sold in the U.S. will be self-driving and most of those cars will be electric. EVs will start to affect fuel demand sometime between 2025 to 2027.
U.S. gasoline demand has stayed relatively flat for the past decade, hovering around 9 million barrels a day with occasional fluctuations, according to the
U.S. Energy Department. But by 2035 electric vehicles could cut gasoline demand roughly in half, Boston Consulting Group projects.
Increasing electrification is hitting at a time when ride sharing apps such as Uber and Lyft are cutting into the car ownership aspirations of younger generations. Self-driving, ride-hailing electric cars won’t need to stop for fuel, and they certainly won’t need to run into a convenience store to buy a Coke or bag of chips.
That means there needs to be a fundamental shift in how gas stations plan for the future, Portera said.
“For these stores to survive,” he said, “they need to focus on the mobility more broadly and what customers need while traveling beyond just fuel.”
Portera said he’s already meeting with gas station owners about ways to adapt to the future reality. Gas station chains such as Texas darling Buc-ee’s are often held up as examples of ways to adapt by selling more retail, clothes, outdoor equipment and expanding freshly-made meal options and coffee sales.
BCG expects gas stations of the future could become service hubs for autonomous vehicle fleets or mini-warehouses where station owners can partner with online retailers to offer “last-mile delivery” services to hasten the speed of delivery of products to customers’ final destinations.
As with the transition from fossil fuels to renewable energy, the shift from gas stations to something else is likely to happen gradually, said Patrick DeHaan, head of petroleum analysis at GasBuddy, which tracks gasoline prices nationwide. Conventional cars still dwarf electric vehicles.
Of the 272 million registered cars in the United States, only about 1.1 million of those cars are electric, according to the U.S. Department of Transportation and the International Energy Agency. Electric vehicles still only make up less than 2 percent of new car sales in the United
States, according to the IEA.
“EVs have hardly moved the needle (for gas stations),” DeHaan said. “We’re still years away from starting to see noticeable impacts to the traditional gas station,”
More bananas
The number of U.S. gas stations has drifted down from about 200,000 in the 1990s to about 135,000 stations today, DeHaan estimated. Gas stations took a major hit just over a decade ago when crude oil topped $140 a barrel and the price of gas spiked above $4 per a gallon in 2008, forcing customers to cut back and many stations to close. That pushed many stations to look to other ways to generate cash, with many expanding into the prepared food market — adding sandwiches, wraps, restaurant-style meals and fresh food items like bananas to their convenience store shelves.
“Ten years ago if you saw a banana in a gas station store it was because someone may have left it behind,” quipped Jeff Lenard, spokesman for the National Association of Convenience Stores. Now bananas in stations are common place.
Prepared foods account for nearly a quarter of profits at gas stations, according to National Association of Convenience Stores. For gas stations with convenience stores, fuel only account for 38 percent of the station’s profits on average.
Although many stations are adapting to changing consumer habits, the shift to electric vehicles may still catch some station owners by surprise as EVs become a larger and large share of the cars on American roads, analysts say.
“It will take a while to switch over,” Lenard said, “but when it does it’s going to feel like it happens fast.”
By then that Sunoco station in Houston may have a lot more new offerings than an Amazon locker.