Natural Gas, Electric Vehicles Have A Bright Future

Exclusive CSNews study examines the progress of alternative fuels, fuel pricing and more

The future is bright for natural gas and electric vehicle charging, according to the results of the exclusive Convenience Store News 2012 Motor Fuels Study. Only about 2 percent of convenience store retailers surveyed said they offer natural gas at the pump currently, but 22 percent expect to offer the fuel alternative within five years. Nearly 3 percent of retailers offer electric charging stations now, but more than 12 percent plan to offer the option by 2017.

Conversely, diesel and ethanol offerings are expected to drop. Thirty-eight percent of retailers offer ethanol now, but only one quarter of the survey participants said they expect to offer the petroleum alternative in five years. Meanwhile, three-quarters of the retailers offer diesel, but that number is expected to dip slightly to 72 percent within five years.

In all, more than 63 percent of retailers offer some form of alternative fuel at this time. Nearly 69 percent expect to offer a fuel alternative in five years.

Retailers have complete control over what alternative fuels they offer at the pump. However, the one thing convenience store retailers cannot control — gas prices — has had a profound effect on their businesses. A whopping 87 percent of c-store retailers surveyed said rising gas prices affected their business, an increase of nearly 6 points compared to last year's study. Almost exactly in unison, gallons of gasoline sold also fell by 1.2 percent.

The average price of gasoline in 2011 rocketed by 2 percent vs. the prior year, to $3.58 per gallon. Gas prices have risen almost 150 percent in the past 10 years. Although hard to believe, fuel prices averaged just $1.39 per gallon in 2002, which was a low for the past decade.

Perhaps, some good news is on the horizon, though. Despite several new daily record gas prices in 2012, the U.S. Energy Information Administration predicts fuel prices will decline 1 percent this year and drop another 5 percent in 2013 to $3.33 per regular gallon.

As for the various regions of the country, the West Coast suffered the highest prices at the pump last year, with regular gasoline averaging $3.74 a gallon. The Gulf Coast enjoyed the lowest prices, with a gallon of gasoline selling for an average of $3.36.

During the first half of 2012, 56 percent of retailers said their overall fuel sales in dollars were up. Thirty-three percent have experienced a decrease in fuel dollar sales, while 11 percent reported similar figures vs. the first half of 2011.

In addition, the average margin per gallon at c-store gas stations increased to 14.3 cents in the first half of 2012 compared to the same timeframe last year.

High fuel prices also accounted for more fuel theft — commonly referred to as drive-offs — in the past year. About one quarter of one percent of fuel sales resulted in a drive-off in the past year, compared to about one sixth of a percent last year. More than 58 percent of retailers surveyed reported no drive-offs in the past year. Additionally, more than 61 percent of respondents require prepayment for gas purchases, which is down from 63 percent last year.

In regards to how customers pay for fuel, most gas stations utilize pay-at-the-pump technology, with 92 percent of c-stores surveyed saying as such. Just 8 percent reported not having that technology. Both figures are nearly flat compared to last year.

Among those retailers participating in the CSNews 2012 Motor Fuels Study, the average c-store had 6.1 pumps and nine fueling positions.

The percentage of retailers selling branded gasoline increased in the past year. More than 67 percent sell branded gasoline, compared to 63 percent a year ago. Retailers selling only unbranded gasoline declined by 3 points year over year to about 27 percent of respondents this year. Still, branded gasoline use has declined from six years ago, when nearly 82 percent of retailers sold branded gasoline.

As for how long branded operators have worked with their current fuel suppliers, retailers have remained in the same branded program for an average of 19 years. In comparison, those who sell unbranded gasoline have remained in those programs for an average of 17 years.

On the rise during the past year is convenience store chains' decisions to fly only one fuel banner throughout their store network. Nearly 84 percent carry only one brand, a sharp increase from nearly 73 percent last year. On average, c-store chains carry 1.3 brands throughout their network.

C-store chains have remained more loyal to their fuel brands as well. Only about 4 percent of those surveyed said they switched brands in the past two years. That number is a huge decrease from last year when more than 12 percent said they had switched fuel brands.

On the topic of payment for fuel, credit is still king at more than 46 percent of retail fuel transactions, an increase of about 2 percent from last year. Cash came in No. 2 at nearly 36 percent, followed by debit cards and automated clearing house (ACH) tied to a loyalty card, respectively. All payment methods other than credit decreased slightly in the past year.

Perhaps due to continued economic uncertainty, motor fuel equipment infrastructure spending also declined in the past year. Retailers spent an average of $279,500 on fuel equipment in 2011, a drop of almost $9,000 compared to the prior year.

Due to less infrastructure spending, the average age of retailers' motor fuel equipment increased. The average age is now 9.6 years, compared to nine years last year.

While infrastructure commitments are down, retailers are focusing more on promotional technologies at the pump. Among this year's survey participants, a hefty 94 percent use a promotional technology at the pump, a significant jump from the 87 percent who responded affirmatively to that question last year. Pumptoppers and video monitor usage both increased by more than 5 points vs. last year. More than 89 percent of respondents noted they use pumptoppers and nearly 24 percent have installed video monitors at the pump.

Television monitors caused audio promotions at the pump to decline, which could lead one to question if "video killed the radio star."

In addition, there was one result from the pump technology survey question that could be considered surprising. Retailers offering merchandise/foodservice ordering at the pump slid significantly, with less than 4 percent offering the option in 2012, compared to more than 9 percent in 2011.