A declining number of American gas stations

The number of gas stations in the United States has dropped in recent years:

But gas stations have been in decline for decades. Between 1994 and 2013, the number of retail fueling sites in the U.S. fell from 202,800 to 152,995—a 25 percent decline. In 2015, the number had slipped to about 150,000. (See page 31 of this report from the National Association of Convenience Stores.) And with several powerful megatrends arrayed against them, there are signs that their numbers could shrink significantly in coming years.

Let’s start with gentrification. (And this is the good news.) In many urban areas, gas station owners are finding it simply doesn’t make economic sense to keep selling gasoline—for reasons having nothing to do with demand for their product. As America’s great cities revitalize and attract more wealth, land is becoming exceedingly expensive. In many cities, and especially in New York, a gas station falls far down on the list of the best things to do with a piece of land. Owners realize they can run their businesses at modest profits for years to come or sell out to developers for giant premiums. In Manhattan, where the best use for a gas station is a site for condominium or office development, the number of gas stations fell by a third between 2004 and 2014—to just 39. As the New York Times reports, “Today there is not a single operating gas station left on the city’s East Side from the southern tip of the island to 23rd St.” The conversion of gas stations into apartments and offices is also starting to happen in other land-constrained cities such as Boston; Washington; and especially San Francisco, where at least two-dozen gas stations have made way for other developments over the past six years.

Several other trends are afoot that will lessen the underlying demand for gas stations’ core product. Gasoline, which was pretty much the only transportation fuel for vehicles until very recently, is slowly being displaced by a couple of sources, neither of which relies on gas stations to deliver them. First, there’s natural gas. Cheap and abundant thanks to fracking, compressed natural gas and liquefied natural gas are emerging as options—not so much for consumers and individual cars but for fleets. One of my favorite sites, NGT News, documents how operators of huge delivery fleets such as UPS or giant armadas of garbage trucks such as Waste Management are systematically switching their fleets to run on natural gas–based fuels instead of gasoline…

The other force is electricity, of course. The penetration of electric cars in America’s fleet is still very low. But every month, several thousand new cars hit the roads—Teslas, mostly—that don’t use any gasoline at all and will never, ever, ever stop at gas stations (unless their drivers need to make a pit stop for a Fresca or beef jerky). Sales of all-electric cars are running at about 6,500 month, according to Hybrid Cars. But there are signs of greater electrification. About 6,000 plug-in hybrids, like the one I drive, are sold every month. And there are many, many more to come. Tesla has already taken reservations for more than 370,000 Model 3s.

If this is indeed a declining industry, it will be interesting to see who is able to stay afloat the longest.

Two additional thoughts:

  1. While it is widely accepted that Americans like driving, it is less discussed how many other industries and firms depend on this. Gas stations exist because people regularly need to fill their vehicles and then a set of practices arises around stopping for refreshments and the restroom (they become convenience stores), getting a car wash, being able to take road trips, etc. What happens to drive-thrus if self-driving cars take over? What about big box stores and shopping malls? Less driving means not just fewer cars but a changed way of life.
  2. The paragraph above on gentrification hints at this but all that land formerly occupied by gas stations represents a significant opportunity. Imagine Shell goes out of the American gas station business. Who takes over all that prime real estate? The market might be limited for such land (just how many fast food chains can there be) even though it is often located at busy intersections.

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