Competition caused some operators to compete on price, hindering profitability
New York, NY (PRWEB) June 19, 2014
Over the past five years, the Gas Stations industry grew thanks to increasing crude oil prices. Due to the nondiscretionary nature of vehicle fuel, demand does not significantly decline when prices rise. Therefore, even as higher crude oil prices caused operators to raise the retail price of gasoline, demand for regular gasoline rose as more people returned to work. Additionally, as the trucking sector recovered from the global recession, demand for diesel fuel continued to climb despite double-digit increases in the price of diesel fuel in 2010 and 2011. Consequently, industry revenue is expected to grow an annualized 4.1% to $38.7 billion over the five years to 2014, including a projected decline of 1.1% in 2014.
However, several developments placed downward pressure on demand for fuel sold at gas stations. As the price of gasoline continued to climb, more consumers purchased fuel-efficient vehicles to save on fuel costs; these cars require less fuel than conventional vehicles, curbing demand for gasoline. In addition, operators faced intense competition from gas stations that operate alongside convenience stores. Consumers increasingly turned to retailers that offer vehicle fuel along with food, beverages and other sundries due to the convenience of these locations. According to IBISWorld Industry Analyst Hester Jeon, “Greater competition led some operators to compete on price, causing industry profitability to slightly decline during this period.”
In the next five years, the industry's performance is expected to wane as competition grows. Also, as the world price of crude oil steadies, the average retail price of gasoline is expected to grow only marginally compared with the previous five-year period. “Steady prices coupled with lower demand will cause the industry's performance to contract in the beginning of the forecast period,” says Jeon. Another factor that will place downward pressure on demand for fuel is the accelerating adoption of fuel-efficient cars. Government-funded rebate programs, the development of charging infrastructure and the introduction of a variety of electric and hybrid vehicles will support the adoption of fuel-efficient cars. However, growing demand from the trucking sector will offset lower demand from consumers in the latter half of this period, allowing industry revenue to increase moderately in the five years to 2019.
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IBISWorld industry Report Key Topics
The Gas Stations industry comprises establishments primarily engaged in retailing gasoline, diesel fuel and automotive oils, whether or not the gasoline station is operated in conjunction with a repair garage, restaurant or other type of operation. Establishments that operate such establishments on behalf of their owners are also included.
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