Why the death of gas stations will be sooner than you think

With the rise of electric vehicles, gas stations are going to become electric stations right? It’s not actually that simple.

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TL;DR

• Gas stations are likely to fall into a death spiral, as more electric vehicles (EVs) and ride sharing means less demand for gas which puts more stations out of business.

• Just switching stations to electric charging is harder than it sounds, and may be impractical as most people charge at home, work, and on the street.

• Gas stations will have to adopt new business models, including ditching gas altogether in order to carve out a new role for themselves.

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The electric vehicle narrative tends to focus on the technological and economic impact of EVs regarding emissions, grid load, and noise pollution, but we tend to forget about gas stations. Gas stations themselves already rarely occupy our attention, as their uniformity, utilitarian function, and unglamorous decor make them an overlooked interruption in our journeys to and from more interesting places.

We go to gas stations because we have to, not because we actually enjoy doing so. Pumping gas is tedious, smelly, and storing highly combustible fuel in the heart of communities is an insurance nightmare.

Add to that the 63,000 violent crimes that occur at gas stations in the US each year, and the (highly topical) fact that a 2011 study found pump handles to be the most germ encrusted public surface, and there is little to endear us to these facilities. The rise of mobile fuel delivery companies is proof enough that we’d rather pay a premium to not have to fill up ourselves.

The number of gas stations has been declining for decades

The first gas station in the United States opened in St. Louis in 1905, and by 1994 there were 202,800 across the country. Fast forward to 2013, and station numbers had decreased by 25% or almost 50,000, and by 2020 that number had shrunk to 115,200. A 2019 report by BCG predicts that 80% of conventional gas stations could be driven (pun intended) out of business by 2035.

Of course new gas stations are still being built, but many smaller facilities are being squeezed out of the market by big-box gas retailers, stations that sell over 940,000 litres per month.

Not only that, but even before EVs became a factor, the impact of US fuel efficiency standards implemented in 1978 means that gas demand today is 14% lower than it would have been had no standards been adopted.

The rise of EVs is simply the final nail in the coffin, as “[…] electric cars are going to send the petrol station business into a death spiral over the next two decades […]” writes Justin Rowlatt, BBC’s chief environment correspondent.

The UK has already committed to banning the sale of new internal combustion engine (ICE) vehicles by 2030, with many other countries having adopted similar goals, with implementation dates between 2025 and 2040. At the same time, one-third of new cars are expected to be electric or partly electric by 2030 according to BCG.

Selling electricity is not like selling gas

All the above factors are going to reduce demand for fossil fuels, further eroding gas station profitability. While some gas stations (particularly highway rest stops) will be able to make going fully electric a viable business model, most gas stations won’t.

Take the case of the first gas station in the United States to convert to full electric. The station in question is in Takoma Park, Maryland and has been in business since 1958. In 2019, the station’s owner decided to go full electric. This switch to electric could not have come about without a $786,000 grant from the Maryland Energy Administration and the Electric Vehicle Institute.

Without public funding, all but the largest and most strategically placed gas stations will be unable to transition to electric based on market forces alone.

The stark difference between gas and electricity sales is on display in how these energy sources are provided to customers. The volatile nature of gasoline and diesel, and the increasingly stringent safety procedures required to dispense them necessitates that such fuels be sold from specific, monitored locations.

In contrast, electricity is pretty much ubiquitous, so there is no need for us to replicate such a centralized distribution system for EV charging.

The twilight of centralized gas stations is nigh, and they are giving way to a decentralized charging system underwritten by the ubiquity of electricity.

According to Erik Fairbairns, CEO of PodPoint, a UK-based EV charging point provider, the proliferation of charging points will see 97% of charging happening away from pump equivalents. At this point you may note that the ubiquity of electricity works both ways, since it is also available at gas stations.

Electricity may be at hand, but local infrastructure is often not sufficient to handle a bank of EVs all charging at once. At full demand, such EV charging stations would be using the same amount of power as a large office building, which would mean very expensive grid upgrades. Distributed charging at home and around town does away with the need for costly grid upgrades.

Charging your car in your driveway may be slow (with roughly 48km of range per hour of charging) but cars already spend 95% of their time parked at home or work.

At-home charging will likely be the norm for suburbia and more rural areas, while areas with higher population density and fewer single-family homes will be more reliant on public charging points such as in parking garages or at the curbside.

EVs can be charged overnight, and in many more places than ICE vehicles, such as from lamp posts, parking garages, and retail outlets. Retail driven charging is on the horizon, and some retailers have started giving customers the option to shop while they charge their cars. Sooner than you might think, “free charging is likely to become like free WiFi, a little bribe to lure you into the shop,” says Rowlatt.

Can gas stations as we know them survive?

If you live in places like Manhattan, San Francisco, or downtown Vancouver, you’ll already have experienced what the rest of us soon will; namely, a dearth or even absence of gas stations.

Public transit, walkability, congestion, lack of parking, and urban density all reduce the demand for gas, and with land at a premium in urban cores, building or running a gas station is just too expensive. Land value and property taxes make gas stations not viable in large cities, with the number of gas stations in Manhattan having shrunk from 52 in 2008 to 31 in 2017.

Similarly, the number of gas stations in San Francisco has dropped by 40% in the last ten years, and Vancouver said goodbye to the last downtown gas station after it was sold in 2017 (the land was assessed at C$38 million ($30.9 million)).

Other gas stations are being repurposed as community spaces, with the Hyde Park Book club (which also hosts events, a store, and a restaurant) in Leeds occupying a former gas station and service centre.

Many of the 5,500 independent fuel retailers of the UK’s Petrol Retailers Association are looking at converting to full convenience stores, with takeout options, and automated car washes to boost income as gas revenue declines. And Quebec’s Couche-Tard (Circle K internationally) is using research from its subsidiary in Norway (the world leader in EV adoption) on how to profit from the EV paradigm shift.

Many gas stations already earn more income from on-site convenience stores than from fuel sales, so it is likely that more emphasis will be placed on serving the needs of customers rather than automobiles in the coming years.

The shift from fossil fuels to electric power is certainly a momentous shift in transportation history, but perhaps an even greater change will be how we relate to vehicles and fuel going forward. The twilight of centralized gas stations is nigh, and they are giving way to a decentralized charging system underwritten by the ubiquity of electricity.