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FuelsInstitute
PURSUING SUSTAINABLE TRANSPORTATION ENERGY
THE TIMES ARE A-CHANGIN’
Tomorrow’s customer will consume far less fuel than will the customers you serve today.
BY JOHN EICHBERGER
T
he vehicle and fuels market is
changing — albeit slowly —
and is being driven primarily
by two fundamental factors:
regulatory requirements and
consumer behavior. The two
influential elements are
combining to create a market
in which the demand for transportation fuels is
declining and the interests of tomorrow’s core
consumer are unlike any before them.
In the United States, demand for gasoline is
projected to decline 22% by 2030, primarily due to
requirements for vehicles to improve fuel efficiency.
The federal requirement has set a target for
passenger cars to attain 54.5 miles per gallon by
model year 2025 — a 51% improvement in fuel
efficiency over the model year 2013 standard —
which will definitely reduce overall demand for
petroleum products.
Countering this effect could be an increase in miles
traveled. One of the historic arguments against fuel
efficiency standards is the belief that a lower cost per
mile of travel would spur additional driving, thereby
negating any reduction in fuel consumption. Looking
at recent trends in consumer behavior, however, this
doesn’t seem to add up.
In fact, since the 1970s the increase in U.S.
vehicle miles traveled (VMT) has slowed considerably. From 1974 to 1991, VMT grew 70%. Then from
1991 to 2006, the rate of increase dropped to 39%,
and the current forecast for VMT from 2013 to
2030 is only 16% — slightly higher than the projected rate of population growth. Considering these
trends in driving behavior, combined with the
requirements to improve fuel efficiency, it is
clear that fuel demand in the United States will
decline significantly.
And as demand drops, who will be your primary
fuel customer?
DRIVER’S LICENSING RATES, TEENAGERS
Driver Licensing Rates, Teenaers
100%
90%
% of Cohort with Driver’s License
80%
70%
60%
50%
64%
67%
63%
50%
56%
51%
40%
30%
20%
10%
0%
1963
1972
(Source: Fuels Institute “Driver Demographics” study, 2014)
54 MAY 2015
nacsonline.com
1982
1992
2002
2012
Driving by Age,BY
1969AGE,
- 2009 1969 – 2009
DRIVING
20,000
Driving by Age, 1969 - 2009
20,000
15,000
15,000
65+
65+
10,000
55 to 64
10,000
55 to 64
35 to 54
5,000
35 to 54
5,000
20 to 34
20 to 34
0
0
1969
1969
1977
1977
1983
1983
1990
1990
1995
1995
2001
2001
2009
2009
16 to 19
16 to 19
(Source: Fuels Institute “Driver Demographics” study, 2014)
Don’t Count on Millennials
Much has been written about the Millennial
generation and its tendency to delay or forego
acquiring a driver’s license or purchasing a vehicle.
The number of teens who have obtained their
driver’s license dropped from 67% in 1982 to just
51% in 2012. More surprising is the fact that 20- and
30-year-olds have also reduced their licensing rates,
from 96% and 91% in 1982 to 89% and 81% in 2012.
Meanwhile, teen VMT has dropped 26% since 1990.
It’s very possible that these numbers will slow
down or reverse as the generation goes through its
life cycle. As Millennials start families and progress
in their careers, their driving behavior is expected
to increase.
Yet history shows that generations tend to behave
consistently over time. If that’s the case, the diminished driving patterns observed with Millennials —
especially compared to prior generations — are likely
to persist despite life-cycle influences. This generation is unlikely to match the miles traveled and fuel
consumption of the preceding generations, meaning
that the effect of their behavior will be felt for the
foreseeable future.
One of the contributing factors to this reduced
reliance on transportation is that the majority of the
Millennials have grown up surrounded by the Internet
and mobile devices. These technologies have facilitated a lifestyle that can accommodate interpersonal
interactions without the need to drive or travel
anywhere. Individuals can network and interact with
each from the comfort of their own homes; they can
have basic necessities delivered and request a ride
from a ride-hailing service via a mobile app.
Further adding fuel to the proverbial fire, younger
consumers are increasingly relocating to urban
environments, where the need for regular, personal
transportation is significantly reduced.
The Millennial Mindset
All of this not only affects consumption patterns but
will ultimately influence vehicle design and powertrain availability. Understanding the interests of
consumers who are not enamored with the automobile will be critical to developing market solutions
that will work.
As automakers invest and experiment with new
fuel and vehicle technologies, it ultimately will be the
Millennial generation that will determine what
succeeds and what fails. Those young consumers,
reliant upon modern communication technology, will
decide whether the future fuel will be natural gas,
hydrogen, electricity or something not yet introduced
to the market.
For fuel retailers, tapping into this mindset will be
an important feature for long-term planning, both on
fuel availability and overall store design and product
offers. The world is changing, and the market has to
change with it.
For more information about the Fuels Institute or to
get involved, contact John Eichberger, executive
director, at (703) 518-7971 or email him at
[email protected].
NACS Magazine
MAY 2015
55