Could gasoline demand decline (even post COVID)?
The global COVID-19 pandemic has caused a sharp decline in consumer demand for gasoline. Commuters who typically filled their tanks on a weekly basis are no longer commuting and discretionary travel has screeched to a halt. However, when you eliminate the global pandemic from the picture, you’ll see that there’s been a long-term decline in demand that’s put pressure on many players within the gasoline supply chain.
Will the demand decline of gasoline continue?
According to a study of gasoline demand published in late 2019, U.S. gasoline demand has been declining steadily, even though miles driven have continued to rise and GDP growth has remained strong. These factors would normally point to an increase in the demand of any product but that’s not been the case with gasoline.
There are several fundamental trends impacting the demand of retail gasoline in the face of increasing miles driven and a strong economy. These factors will also have an impact on the supply chain partners that service this vital part of our economy. According to a recent article published by Boston Consulting Group (BCG) there are some deep trends underway:
- The penetration of alternative fuels into the automobile market, especially electricity.
- The changes in mobility that are being driven by ideas like ride sharing, car sharing and autonomous vehicles in an increasingly urban population.
- Increasing demand for heightened customer experience.
The first two factors certainly put downward pressure on gasoline demand and the third factor is laying the foundation for the new competitive landscape for retail stations.
The magnitude of gasoline demand destruction depends on the penetration of new technology like electric vehicles and new mobility models. However, some studies offer some pretty jarring projections of over a 30% reduction in gasoline demand over the next decade or two.
There are thousands of supply chain partners including retail store owners/operators, transportation companies, distributors and wholesalers who are going to be competing over a pie that is shrinking, even according to the rosiest forecasts. Gone are the days of counting on end customer demand pulling through the need for the current business models of gasoline supply chain partners.
Increased competition over a smaller pie of demand, combined with increasing business costs, will surely cause an environment of increased margin pressure. Therefore, the need for business model transformation has never been more important; not just to thrive, but to stay alive.
Read more about how a the transformation of customer experience is becoming the new battlefield of competition for the fuel supply chain.
https://fuelnownetwork.com/2020/04/21/the-changing-face-of-gasoline-demand/
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