The past year has seen shifting trends in gas demand and fluctuating oil prices, inflation increases, a federal push for electric vehicle (EV) adoption and charger implementation, and growth in biofuel usage. These factors have all contributed to the fuel landscape in 2023 and its trajectory for 2024.
Since one of the biggest draws bringing customers into the convenience store space is the need for fuel, c-store retailers are keeping abreast of news and trends regarding what the fuel environment looks like today and where it’s heading.
Breaking Into EV
EV adoption is one of the bigger topics of interest for c-store operators as they consider how to improve the forecourt.
The percentage of zero-emission vehicles in operation by 2035 is forecasted to be 16.5% with an aggressive outlook, whereas a conservative lens has a forecast of 5.6%, according to Transportation Energy Institute research.
For those retailers that have entered the playing field, they have taken multiple pathways.
Madison Heights, Mich.-based c-store chain My Stop launched its own line of EV chargers.
“(It was) in response to the urgent need for sustainable transportation solutions. Our commitment to environmental responsibility, coupled with the rising demand for EVs, technological innovation, market opportunity and government incentives, prompted us to contribute to the growth of the EV charging infrastructure,” said Julian Hanna, director of operations for My Stop Convenience and Petroleum, which has nine stores in Michigan.
Hanna believes c-stores with EV chargers can attract a new customer base and more partnership avenues; he noted the addition positions c-stores as progressive.
Pilot Travel Centers LLC, whose footprint includes 870-plus locations across the country, is one chain leading the charge on EV adoption.
Pilot is committed to building a coast-to-coast EV charging network given the company’s belief that the number of EVs on the road is rising and its expectation that the trend will continue.
“The decision to make this move was relatively straightforward — we are here to meet drivers’ needs, and those needs are becoming increasingly electric,” said Matt Dunn, head of mergers and acquisitions at Pilot Travel Centers LLC. “With our travel centers located along all major highways and interstates, we have a unique opportunity to provide EV drivers with a better, more convenient charging experience that increases range confidence to take longer-distance trips.”
In 2012, Altoona, Pa.-based Sheetz installed its first EV charger in Pennsylvania, and today it offers a total of 683 EV chargers at 99 of its 700 stores in six states, with plans to open chargers at a 100th location soon.
Trevor Walter, vice president of petroleum supply management at Sheetz, said opportunity exists to attract customers to its stores with EV chargers in areas where charging options are limited — particularly since many potential consumers cite range anxiety as a concern.
EV Legislation
Another factor to consider is the Biden Administration’s previously announced goal for federal vehicle acquisitions to be 100% zero emission by 2035. California furthered the zero-emission agenda by stipulating that all new cars and light trucks sold in the state need to be zero emission by 2035.
At least 13 states have adopted a version of California’s standards to transition new car sales to electric as opposed to gasoline by 2035.
“I think (more states adopting California’s policy) sends a dangerous message because California is a special exception in the Clean Air Act — they do their own thing. And there’s a provision in the Clean Air Act where other states can emulate California, but they have to emulate California exactly,” said John Eichberger, executive director of the Transportation Energy Institute.
Eichberger noted that these states adopting California’s 2035 zero-emission vehicle mandate aren’t investing the money on infrastructure that California is that’s needed to reach the goal.
“And so they have this mandate that they’ve just adopted by rule that they are not prepared to support. First of all, California is not going to make their goal either. I’m 100% confident of that, but they’re going to have a much better shot at making their goal than any of these other states because the other states don’t have the resources,” he continued.
Eichberger believes many of these states are going to have to rethink their approach.
Eichberger is not the only person who questions the likelihood of California reaching its mandate. Phil Near, president of Jump Start Stores, which operates 26 stores in Kansas, remains skeptical.
“There’s not enough electricity produced in California today to meet their mandates,” Near said.
Ed Collupy, president of Collupy System Solutions LLC, said he expects states will make progress in following California’s lead, but he also acknowledged that whether or not they can follow to the same degree is “always a bit of guesswork.”
Joel Hirschboeck, senior vice president, fuel, GetGo, recognizes the hype that exists with EV evolution, but he doesn’t believe execution matches it.
“As progress toward improved charging infrastructure marches on, the consumer sentiment for EV remains tentative. EV sales continue to increase but remain a very small portion of total vehicle sales today,” he said.
GetGo operates over 260 locations in five states. The chain currently has 14 locations that have EV direct-current-fast-charger charging stations. Additional GetGo stores are under different stages of development with both the chain’s proprietary charging station network and Tesla super charging stations.
“As a company, we believe ‘markets’ not ‘mandates’ are the best way to determine EV’s long-term viability,” Hirschboeck continued.
Additionally, he suspects that the nation’s energy policies, including EVs, will be a significant topic of debate among candidates during the election year.
One of the largest concerns among those looking to reach a certain EV goal, however, may be the strength of the electric grid.
“What’s happening with energy utilization at the moment is the demand is switching from liquefied product to the grid, and that’s by way of EVs. So EVs are substantially drawing more from the grid, and that will be amplified as more demand happens for commercial charging locations. …” said Matt Beale, partner at W. Capra Consulting Group.
Another concern for the states pushing for an uptick in EV drivers is both the demand on utilities and supply chain constraints.
“EVs are still going to have a huge play in the market. It’s going to take time, which is a good thing because the utilities are struggling to build the infrastructure. There’s a back order on a lot of necessary equipment,” said Eichberger. “For the convenience industry, the slowdown of EV adoption is a good thing because it gives them more time to get themselves prepared.”
Despite potential setbacks, many are pleased with a federal push for EVs.
Hanna, for example, noted federal involvement is a positive step in terms of sustainable transportation.
“Governments, including the U.S., are recognizing the environmental benefits of EVs in mitigating climate change and reducing air pollution,” said Hanna. “Financial incentives, regulatory support and international collaboration are integral components, fostering a holistic approach to drive the transition from traditional internal combustion engine vehicles to cleaner and more sustainable EVs.”
“Overall, the federal push for EVs signifies a commitment to a greener future and the realization of long-term environmental and economic benefits,” he continued.
Sheetz, too, looks forward to working with the federal and state governments to expand its EV charging footprint.
“As a company, we think having the support of federal and state entities will go a long way in expanding the popularity of electric vehicles and expanding the reach of charging access,” said Walter.
Barriers to Entry
C-store retailers considering EV charger implementation must not only examine the advantages but also any obstacles in their path.
“The biggest barrier for entry is cost. There are concerns from retailers about profitability and the total costs associated with the infrastructure of EV charging,” said Walter. “For example, charging multiple vehicles at once at a store could cost the operator a large amount in supplemental fees or demand charges. Additionally, there are utility fees and initial capex costs associated with EV charging.”
Anticipating the high costs of developing an EV infrastructure, the Biden Administration offers federal funding programs such as the National Electric Vehicle Infrastructure Formula Program (NEVI) and the Discretionary Grant Program for Charging and Fueling Infrastructure.
NEVI provides funding to states to strategically develop an EV charging infrastructure along alternative fuel corridors, followed by publicly accessible locations or other public roads.
“NEVI and other programs offered by federal and state governments to increase EV charging infrastructure are critical due to the high cost of investment. Without these incentives, these projects are not viable. These incentives should exist to solidify this emerging market,” Hirschboeck stated.
Pilot is one chain that has been able to grow its EV charging footprint with the help of NEVI.
“We’ve found significant value and support in having partners like General Motors and EVgo, as well as public/private partnerships like NEVI, to help us tackle building an EV network,” said Dunn.
Pilot had around 25 EV charging locations publicly available by the end of 2023 and plans to have 200 locations equipped with EV chargers by the end of 2024. The chargers in its network can deliver up to 350 kilowatts, and the EVs will be about 80% charged in 20 minutes.
“Our ultimate goal as part of the collaboration with General Motors and EVgo is to offer fast-charging stations at 500 of our Pilot and Flying J locations,” said Dunn.
C-stores not located on major highways, however, may struggle more to find funding.
Collupy noted that during a Convenience Technology Vision Group (CTVG) meeting, one of the group’s members commented that their chain was not selected for grant funding for EV charging.
“The interstate or major highway corridors is where most of the funding for EV charging units has been going. … Their stores are not sitting along the highway in other areas, so they feel like they didn’t win because of where their stores are located,” said Collupy.
However, the chain can try again with the next round of funding requests in their state, according to CTVG.
EV Market Trajectory
While considering entry, c-store retailers need to be thinking about where the EV market is, not just in the present, but years in the future.
“We’ve been presented with these aspirational forecasts and aspirational goals that I’ve always called way too aggressive — the market just can’t support it,” noted Eichberger. “And now we’re starting to see that come into fruition. That those huge goals … just probably aren’t attainable, but we’re still selling more EVs, and so the market share’s growing.”
The U.S. is at a roughly 1.2% national average for market penetration of EVs to the rest of the fleet, according to Eichberger.
Hirschboeck expects an increase in the number of EVs sold in the market with scale, which will grow the potential revenue the charging stations generate, even if the number of EVs on the road today are still a small percentage.
“Though still emerging, we are anticipating the market will grow multifold over the next five years, with EV tax credits driving continued expansion. There is also a path toward universal charging that will allow more customers to use a variety of chargers, reducing customers’ range anxiety and making the charging process much simpler,” said Hirschboeck.
Sheetz’ Walter agreed that EV popularity will eventually increase, as will the opportunities for c-stores to “get in front of this population.”
Eichberger still encourages convenience retailers to consider their current markets and what they’ll look like in five to 10 years.
“(Retailers need to) plan their forecourt decisions based upon what their market is going to do, not what the national trends are going to do, but what the drivers and their communities are going to do. That’s the only way they can be assured they’re going to be able to make money on installing the chargers,” he said.
EV Alternatives
Although the conversation surrounding EVs remains strong, other options exist to retailers looking to diversify their fuel offerings.
“Biofuels represent a promising avenue in the pursuit of more sustainable and environmentally friendly fuel alternatives. Embracing a diversified fuel setup on the forecourt is essential for reducing reliance on conventional fossil fuels and mitigating the environmental impact of transportation,” said My Stop’s Hanna.
Alongside conventional fuels, My Stop offers customers a blend of biofuels derived from renewable sources, including plant-based feedstocks or waste materials.
Pilot also offers alternative fuel options, such as unleaded 88, E-85, biodiesel, hydrogen, compressed natural gas and liquefied natural gas.
And the needs of its customers continue to evolve, as evidenced by California, which has more legislation on the transportation industry’s environmental standards and whose residents are more interested in alternative fuels, noted Dunn.
Jump Start has E-10, E-20, E-30 and E-85 available with the Dover Fueling Solutions Anthem UX platform on its Wayne Ovation fuel dispensers.
“The thing that we like about those products is they have less tail pipe emissions, and they give consumers a choice. In our part of the country, we feel like that’s the future,” said Jump Start’s Near.
Near said that while it’s a slow education process for consumers regarding biofuels, awareness is growing.
“I think in the current stage, it comes back to reducing the carbon footprint, reducing emissions for the fuels we sell today. I think that’s where we can make an impact today as we watch and see what happens with the EV world,” he said.
GetGo provides E85, renewable natural gas and biodiesel minimally across its footprint.
“Biofuels are a critical component to near-term reductions in carbon dioxide, and they play a role in our sustainability initiatives. We are actively searching for opportunities to enhance our biofuel offerings even further,” said Hirschboeck.
Hirschboeck recommended other c-store retailers revitalize their interest in renewable fuels.
“Regardless of the pace of (EV) adoption, there are still 250 million internal combustion engine-powered vehicles on the road that will take decades to replace. If the goal is to use EVs to achieve zero emissions, the bridge to get there may be through renewable fuels,” he said.
Apart from biofuels, one avenue W. Capra’s Beale sees as a potential alternative is the use of hydrogen.
“The idea that I’ve been playing with and generating some support in the industry for is large-scale hydrogen-to-electricity conversion,” said Beale.
Beale’s concern that EVs and other projects require too much from the electric grid, especially with states such as California making a large push for EV implementation, has led him to contemplate putting some of the power demand back onto liquefied products.
“Using hydrogen to convert to electricity to charge the batteries that charge the trucks means that demand doesn’t sit with the grid and everyone wins. And c-stores know how to move liquefied energy around. That’s what they’ve been doing since inception,” he said.
Beale acknowledged hydrogen power has its complications, but he also noted that oil companies are now investing in hydrogen-powered trucks.
“You just put the hydrogen directly into the truck and use it instead of diesel. …” he said. “You can use that hydrogen directly, but then you can also electrify the hydrogen and charge electric vehicles with it as well. So the one fuel source provides (for) two needs. … When you burn (hydrogen), it produces water — it doesn’t use any carbon.”
Beale revealed that a few substantial white hydrogen pockets have been discovered in Europe and the U.S.
Fuel Demand
While retailers debate adding EV, alternative fuels or both to their forecourts, they are still monitoring gasoline demand.
Hirschboeck has noticed the impact of inflation on fuel demand, considering that it remains soft nationally despite the average price of gas being significantly lower than the country saw in the summer of 2022.
As of Dec. 14, the national average for a gallon of gas was $3.10, according to AAA.
“I think it will be a soft winter for demand, but hopefully people will be ready to hit the road this summer,” he said. Walter, too, has logged the influence of inflation on the fuel industry.
“The U.S. Energy Information Administration projects gas prices to rise slightly in 2024 as global production slows and that gasoline demand is expected to drop on a per capita basis to levels lower than those recorded before the pandemic,” he said.
However, Walter deems it worth monitoring the remote work landscape in 2024, as fuel demand will increase if more employees are required to go back to the office.
Hanna believes the fuel industry will see a positive 2024 “fueled by high oil prices, increasing demand and strong financial position. Upstream companies are expected to maintain investment levels, leading to increased production and potential supply growth. Air travel recovery will also boost demand for jet fuel. While macroeconomic uncertainties and geopolitical tensions remain concerns, the industry is expected to have a solid year overall.”