Gas Stations: Not Long For This World?

In my post about some redevelopment in Shoreview I mentioned the likely closing of the Hill Blacksmith shop in the coming years. Some took exception, saying that they didn’t think it very likely, especially since it was built only recently in 1883.

While busy today, the Hill Blacksmith Shop may not be for long if self-propelled wagons catch on.

While busy today, the Hill Blacksmith Shop may not be for long if self-propelled wagons catch on (Photo: Hill Blacksmith Shop, North Oaks, MN – MN Historical Society).

We’ve used horses for centuries and they’ve served us well. I do think that the wagons with gasoline engines will become much more commonplace though and one day I think it will even be common to see dozens go by in a single day. People say they can’t go very far but there are rumors that Bertha Benz drove her husband’s wagon 66 miles in a single day to see her mother.

Oh wait, that was my August 1889 post for streets.mn.

In my internet blog post about the redevelopment of the NE corner of Hodgson & Hiway 96 in Shoreview I mentioned the likely closing of the BP gas station in the coming years. Some took exception, saying that they didn’t think it very likely.

Gasoline engines have served us well, but nobody who test drives an electric car wants to go backwards.

Why This Matters For Cities

Planning for what their communities will look like in the future is a key job for cities. Those that plan well do well and those who plan poorly see falling housing values, falling tax revenue, and increased problems from all directions.

One important element today is increasing pressure from home buyers for communities rather than high speed multi-lane suburbs. People want communities that are walkable and bikeable and that include daily amenities like schools, groceries, eateries, and pharmacies very close by–typically within two miles. Predicting future land-use needs here is critical. Knowing that a gas station will no longer be on a corner changes the calculus on what that corner and surrounding area can look and feel like in five years. More on this later. Let’s look at why our gas stations will disappear.

Drivers Of Change

Downward pressure on gas sales and the demise of gas stations (and muffler shops and repair shops) will come from two directions; decrease in driving and increase in PHEV and BEV vehicles.

There has already been considerable downward pressure on gas sales from people driving less. This particularly among Millennials but also a bit among all generations. People are increasingly choosing to walk and bike more for their daily transportation and to live where they can. Carless and car-lite families are becoming more and more common.

People are also waiting longer to get their driver’s license, if at all. Ten years ago 44% of 16 year olds had a license, today that’s 29%. This is largely chalked up to parents (and teens) not thinking it safe. The increasing costs of insurance don’t help and social media has played a role as well.

These, combined with improved fuel efficiency, have already led to an over 7% decline in gasoline sales over the past 10 years (measured in gallons sold).

The nail in the coffin will I think come from batteries.

 

LM600gs-5

Battery Electric Vehicles (BEVs) like the Tesla Model S and Nissan Leaf (above) that have no gas engine will have a moderate impact initially and a major impact by 2020. While these are not overly common in Minnesota today, their numbers are increasing and this will begin to accelerate in 2017 with the introduction of numerous BEVs with longer range and lower prices.

BEVs are very common in California, Seattle, Portland, and Atlanta where they now account for 4-8% of new vehicles. They’re increasingly common in St Paul, Boston, Denver and Washington, DC. On the other hand you can drive around Birmingham, Alabama for a week and not see a single one. A fairly normal geographic adoption pattern of new technology similar to what was seen with flat screen TVs replacing CRTs?

The upper end is possibly led by Aston-Martin with their RapidE expected in 2017 and AM-RB 001 hypercar in 2018. Aston CEO Andy Palmer has stated that their future is all electric. McLaren are rumored to be following Aston and putting their eggs in the BEV basket. Ferrari have been a bit more circumspect and have hinted that all of their cars will get hybrid powertrains and that they are looking intently at BEV. A Ferrari dealer in Sweden said that they can’t continue to loose sales to Tesla. Ouch. At the top of the top and for those with an extra million or two there’s Rimac (above) who make only BEV hypercars and Koenigsegg who have questioned the future of gas engines ability to compete with electric.

At the close of 2015 there were three viable electric cars available; Nissan Leaf, Tesla Model S, and BMW i3. By the end of 2017 there will be at least 12 with additions from Tesla (Model X & Model 3), BMW (i5), Chevy (Bolt), Audi (Q8 & Q5) and others. At least five more are coming in 2018 including two from Volvo, whose CEO recently stated that they expect at least 10% of global sales to be BEV by 2020.

Manufacturers are in a tough position. Many, the Germans in particular, have said that they were caught with their pants down by Tesla and have lost considerable marketshare to the upstart who now leads the segment. Responding is difficult though. Introducing a BEV competitor will only serve to waken their customer base to the advantages of BEV’s and bring more direct comparisons to Tesla. This will also cannibalize their current ICE offerings as there is not as much differentiation with electric systems as gas which is easily seen with Tesla producing a car that is generally faster, safer, better handling, quieter, and smoother than even the most expensive German cars. They may need to choose between cannibalizing themselves or letting others do it for them. Musk overreached with the Model X and problems with the doors are bringing a bit of relief to the other manufacturers. Few believe he’ll make that mistake again and fear that the upcoming Model 3 will radically change the landscape. (Photo: Bonnie Norman (Tesla Roadster, Model S, Model X), Data: Bloomberg)

Manufacturers are in a tough position. Many, the Germans in particular, have said that they were caught with their pants down by Tesla and have lost considerable marketshare to the upstart who now leads the segment. Responding is difficult though. Introducing a BEV competitor will only serve to waken their customer base to the advantages of BEV’s and bring more direct comparisons to Tesla. This will also cannibalize their current ICE offerings as there is not as much differentiation with electric systems as gas which is easily seen with Tesla producing a car that is generally faster, safer, better handling, quieter, and smoother than even the most expensive German cars. They may need to choose between cannibalizing themselves or letting others do it for them.
Musk overreached with the Model X and problems with the doors are bringing a bit of relief to the other manufacturers. Few believe he’ll make that mistake again and fear that the upcoming Model 3 will radically change the landscape. (Photo: Bonnie Norman (Tesla Roadster, Model S, Model X), Data: Bloomberg)

At the very least there is considerable momentum with BEVs.

Perhaps most important is that people in Minnesota are increasingly thinking of battery electric cars as a viable transportation option which was not the case just one year ago.

LM1200gs-5

Better Fuel Economy of Internal Combustion Engine cars will have a minor impact. Most manufacturers, Subaru excepted, are no longer investing much in improvement to these and focusing more on BEV and PHEV vehicles. The greatest impact here will be as older and more gas hungry cars are retired from service which will raise the average MPG of those remaining.

Possibly the greatest impact will be from Plug-In Hybrid Electric Vehicles (PHEVs) that I’ll look at in Part II along with other factors and a shot at some predictions.


Streets.mn is a non-profit and is volunteer run. We rely on your support to keep the servers running. If you value what you read, please consider becoming a member.

, ,

23 Responses to Gas Stations: Not Long For This World?

  1. Novacek March 23, 2016 at 9:23 am #

    Gas stations will still be there. They just may not sell (much) gas.

    Rumour is they make almost all their money on drinks/snacks/convenience stuff as it is today.

    My bet is they’ll still be there. Maybe with fewer pumps and more straight up parking spots.

    • Adam Miller
      Adam Miller March 23, 2016 at 9:35 am #

      Except that they can sell you that other stuff at big markups because you’re already stopping there for gas. When there’s no need to get gas, far fewer of them will be able to survive on convenience alone.

      That said, it’s going to be awhile still before there’s a real drop off in people wanting gas.

      • Walker Angell
        Walker Angell March 23, 2016 at 10:15 am #

        That’s a good point. I will stop in one occasionally for a drink but no gas but I don’t think that’d keep them in business.

    • Walker Angell
      Walker Angell March 23, 2016 at 10:16 am #

      Agree. I think that some will become neighborhood convenience stores. How many? 30%? How well will they be able to compete with the CVS’s and Walgreen’s that have sprouted on every corner?

    • Al Davison
      Al Davison March 23, 2016 at 11:31 am #

      I’ve heard that rumor to be true as well. It’s like movie theaters that rely on concessions for profit since they don’t make much on the actual ticket sales.

      The movie/gas is what initially will entice the customer to the theater/gas station, in which additional products (such as food and beverages) may be bought.

      I also agree that they will still be there, with less focus on gas. Many go to places like Kwik Trip for basic groceries and snacks.

  2. cobo Rodreges March 23, 2016 at 10:41 am #

    Cars last about 11.4 years on average, So it would probably be 2030 or so before electric cars represent ~15% of the cars on the road. The rest will need liquid fuel.

    I think Gas stations will do OK for some while….Plenty of time for them to reinvent them selves again, like they did when they started adding convenience stores, and fast food.

    • Joe March 23, 2016 at 2:19 pm #

      And even that is pretty optimistic towards electric vehicles. To get to 15% that fast would require early and quick adoption. So the headline becomes “In 15 years at the earliest, will gas stations be able to adjust to a 15% loss in gasoline sales?”

      • Novacek March 24, 2016 at 10:32 am #

        It’s more complicated even than that.

        My guess is that EVs are (for the most part) replacing relatively high-fuel economy vehicles on the margins.

        Look at the overall fleet fuel efficiency numbers. They were dropping for a bit but flatlined recently.

        15% of the fleet =/= 15% of gasoline sales, as long as there’s a bunch of big SUVs and pickup trucks running around.

        • Walker Angell
          Walker Angell March 24, 2016 at 11:06 am #

          I agree. At least with the Leaf and Volt. What about the BMW i3? Tesla Model S?

          What impact will the Model X have? The Mitsubishi Outlander and Chrysler Pacifica PHEV’s?

  3. Gehalt March 23, 2016 at 11:33 am #

    Ironically, Walker, most of those comments you are referencing about the existence of gas stations were deleted!

    For what reason, I cannot be sure as I recall they were civil.

  4. Stuart March 23, 2016 at 2:04 pm #

    I think that most people agree the EVs will take market share and become dominant as the technology improves range and affordability. The main complaint I have with your article is the time frame.

    Most of the cars on the road today will still work fine 5 and even 10 years from now. Most of the cars replacing the ones that do break completely will still be ICE vehicles for at least the next decade. Your estimate of how long gas stations will stick around seems completely unrealistic.

    • Walker Angell
      Walker Angell March 23, 2016 at 4:33 pm #

      I largely agree. I think ICE vehicles will hang around a while — but because their resale/trade-in values will be low and so people will choose to drive them longer. But it’s also for this reason that new car sales will move towards electric faster. Today I wouldn’t buy a new ICE unless really really necessary because I believe the value will drop much faster than historical depreciation. This is one reason we are waiting to replace my wife’s car — until a suitable EV option is available (or it breaks down and requires expensive repairs). I think an EV will hold its value much better than an ICE.

      I doubt most people would think that today but as each month goes by and people see more and more EV’s and PHEV’s on the road they’ll begin to consider ICE resale and this combined with the benefits of electric will drive demand for new ICE vehicles down fairly quickly.

  5. GlowBoy March 24, 2016 at 1:01 am #

    “BEVs are very common in California, Seattle, Portland, and Atlanta where they now account for 4-8% of new vehicles”

    Having recently moved from Portland I can confirm this. You can’t travel more than a few blocks in Portland without seeing a Leaf. They’re not at Prius levels of popularity yet, but probably at least as common as Honda hybrids now. And Teslas are easily as common there as Leafs are here.

    Also, the count of “three viable electric vehicles” is true as far as nationwide availability goes, but quite a few more than that are available in some markets: the Chevy Spark EV, The Honda Fit EV, the Mitsubishi i-MIEV, the Fiat 500E, Mini E, and the Smart ED (yes, that really is its name) come to mind as available in Portland, and I’m pretty sure that’s not a complete list. But of course the overwhelming number of EVs there are still Leafs and Teslas.

    • Walker Angell
      Walker Angell March 24, 2016 at 10:06 am #

      Good points. Those other cars are commonly called compliance cars. 10 states have elected to adopt California’s CARB standards that require manufacturers to sell a certain number of zero emission vehicles or ZEV’s which are generally electric (though hydrogen fuel cell qualify as well). To meet the requirements the manufacturers will produce a limited number of ZEV’s that are usually available only in the ZEV states.

      Many of these were not intended to be key products but popularity has changed their thinking. Honda in particular have largely discontinued their compliance car program and are coming out with a number of much better designed BEV’s and PHEV’s over the next couple of years.

      The ZEV states are:

      There’s a part of me that would like to see MN become a ZEV state but I think that may be a mute point now as I think the other benefits of EV’s will cause a fairly fast adoption rate without ZEV mandates.

      • Walker Angell
        Walker Angell March 24, 2016 at 11:33 am #

        I should have also included that some of these such as the i-MiEV are not necessarily only compliance cars but are very popular outside of the U.S.

  6. Scott March 24, 2016 at 2:03 pm #

    If we see a D in the White House in 2017, I think the switch to electric will accelerate greatly. The science of climate change is rapidly advancing, and the news seems to grow significantly worse with every passing day. If we follow the science, we will be using renewable powered BEVs and PHEVs a lot, and a lot sooner than their pure technical superiority over ICE would be expected to drive.

    This should also drive significant investment in electric transit, bicycle infrastructure, and improved pedestrian infrastructure as well.

  7. robsk March 24, 2016 at 2:08 pm #

    While these trends are promising, I wouldn’t make any predictions that the gas station goes away so soon. Profits to the store generated from gasoline sales are less than the state and federal taxes collected. Plenty of other things for our consumer culture at these places.

    Affordability is a key issue that should not be overlooked.

    A problem with Zero Emission Vehicles, is that the name is misleading. We still get over 60% of our electricity from coal and “natural” gas. How the juice is generated is summed up nicely here — https://www.washingtonpost.com/graphics/national/power-plants/

    • Walker Angell
      Walker Angell March 25, 2016 at 9:16 am #

      We’ll see. I think, as Adam pointed out above, this may be largely because they have a captive audience in people purchasing gas.

      • Rosa March 25, 2016 at 7:59 pm #

        there’s also the costs of selling a site that’s been a gas station – as long as it’s functioning, there’s not really cleanup costs, but passing on the spot to another use often requires a lot of remediation. Closed gas stations seem like they sit empty for ever and ever, and several times when I’ve asked neighbors or real estate agents why, they claim that’s the main reason.

    • GlowBoy March 27, 2016 at 11:28 pm #

      On the ZEV point, the emissions from charging a BEV vary tremendously by region, power provider, and power plan. Our standard power plan with PGE was something like 40% coal (a mega-plant which will be converted to gas by 2019 IIRC), but for about an extra penny per kWh we got essentially GHG-free electricity. I believe the average mix was something like 50/40/10 hydro/wind/geothermal on average, and it was still quite affordable at just under 9c/kWh.

      One effect of widespread BEV adoption is that it drives demand for cleaner power, because (at least today) it’s pretty important to the people buying BEVs.

  8. mplsjaromir March 25, 2016 at 10:25 am #

    Betteridge’s law of headlines states: “Any headline that ends in a question mark can be answered by the word no.”