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DALLAS – Technological innovation and fuels are clearly intertwined, making the "Future of Fuels" an apt choice for the keynote session closing out the fourth day of THE Tech EVENT.
Twenty years in the future, convenience store retailers will be selling less fuel than today, said John Eichberger, vice president of government relations for NACS, the Association for Convenience & Fuel Retailing, and director of the trade group’s recently formed The Fuels Institute.
In fact, since reaching a peak in 2007, fuel gallons sold and consumed declined by 7.5 percent, according to U.S. Energy Information Administration (EIA) data. "And I don’t see fuel consumption improving any time soon," Eichberger stated during today’s event at Dallas’ Hilton Anatole hotel. "Consumers will make fewer visits to gas stations in the future and retailers will need to find a way to make up for that loss."
Corporate Average Fuel Economy (CAFE) standards and the Renewable Fuel Standard (RFS) are the two reasons why gas station visits will decrease, he explained. CAFE standards require that U.S. vehicles achieve 54.5 miles per gallon in fuel economy by 2025. The Renewable Fuel Standard requires refiners to use 13.8 billion gallons of ethanol this year and 15 billion by 2015. Ethanol is typically combined with gasoline in a formula of up to 10 percent, which is referred to as the blend wall.
Perhaps the biggest question looming over the fuels industry -- and its future -- is how both of these standards will ultimately be achieved, especially because EIA data suggests only 0.5 percent of all fuel sold by 2040 will come from alternative fuels.
Eichberger believes that figure will actually be higher than 0.5 percent, but he stopped short of saying alternative fuels will take the industry by storm in the next 27 years.
Some alternative fuels do show promise. Retailers looking for a growth opportunity should take a long look at diesel, he relayed. "Gasoline demand is expected to drop by 18.4 percent in the next 27 years. But diesel demand will go up by 26 percent. You have to be thinking about selling diesel. It’s only in about 40 [percent] to 45 percent of stores."
Natural gas also could make a dent in the fuels market. According to a recent NACS survey, 83 percent of consumers said they are likely to buy natural gas at the pump if it’s available. "Natural gas has shown to provide 50 to 75 [cents] per gallon in margins," noted Eichberger. "To retailers, it’s all about margins."
While diesel and natural gas hold promise for the future, ethanol probably does not, the executive acknowledged. "Consumers are finding they don’t like E85," he said. "The average flex-fuel vehicle consumes only 14.35 gallons of the fuel annually."
E15 has flaws as well, albeit for different reasons. Currently, 24 U.S. gas stations sell the alternative fuel, likely due to plenty of legal wrangling. Although the U.S. Environmental Protection Agency (EPA) last year approved the use of E15 in automobiles released in or after 2001, petroleum groups and the AAA have shunned the alternative fuel, saying it gets poor fuel mileage and can damage engines that auto manufacturers have already stated they will not cover under warranties.
"Misfueling is also a big problem with E15," said Eichberger. "[A gas station] violates the Clean Air Act if someone misfuels with E15. Violations are up to $37,500 per day. The EPA has stated they don’t plan to go after c-stores who sell E15, but they refuse to put that in writing."
In regards to fuel alternatives, electric is the one option that can make limited inroads in the industry, The Fuels Institute director concluded. He specifically turned his attention to one brand making all-electric cars: Tesla Motors Inc.
"It was the [Motor Trend] car of the year," he mentioned. "And Consumer Reports said it was the best car they’ve ever tested. So, consumers are sure to take notice. The problem is the car sells for $90,000."
THE Tech EVENT wraps up tomorrow. The final day of the trade show will feature a networking breakfast and four PCATS (Petroleum Convenience Alliance for Technology Standards) committee meetings.