John Eichberger:
Hey Jeff.

Paige Anderson:
Hey Jeff.

Jeff Lenard:
The April issue of NACS Magazine cover story is looking at what consumers say about fuels. It was written when gas prices were $3.50 a gallon. They are not $3.50 a gallon now they’re, over $4 a gallon. So let’s start right there in terms of looking at elevated prices. AAA came out with a survey that says the tipping point has now happened in terms of will people drive less, will people behave less? NACS did a magazine article in 2008, where we found that $3.71 was the tipping point. So I’ll start with you, John. Is there a tipping point that people will change their behavior and have we reached it?

John Eichberger:
I don’t think there is a tipping point. What we’ve seen in surveys and behavior over the years is people adapt. They get used to prices. They don’t like it, they’re going to complain, it has a significant impact on their feelings about the economy. But typically whenever you ask them at what point will you change your behavior, buy a different car, it’s always the next threshold. So that point at which people think they’re going to change behavior keeps moving with the price of fuel. I’ve looked at the data over the years and there’s not a whole lot of variability in terms of fuel consumption when price go up. So much of our driving is non-discretionary. If they’re going to think about buying a different vehicle that’s one thing, but very few people are going to go out and buy a new vehicle because gas prices went up. They may change the vehicle they purchase the next time they buy one, or try to get a more fuel efficient vehicle, but I don’t think there’s a tipping that’s going to have dramatic changes. Jeff, you and I have looked at this for years. Whenever prices get to a certain level, they are so quickly and so often followed by a massive drop. And so any momentum to change behavior is offset by some massive change in market conditions that follow these run-ups. I’m pretty skeptical that there’s going to be a major change in consumer behavior.

Jeff Lenard:
Paige?

Paige Anderson:
One thing I would add is that driving behavior did change during the pandemic. And as we’re getting back to whatever the new normal is, you still have a percentage of folks who are still working from home and you still have folks that perhaps what’s changing is the time they’re doing errands. Whereas before they would drive to work and on the way home stop at the grocery store, those types of activities and errands. What we’re seeing is you’re working from home, but maybe you’re going to the grocery store at 10:00 in the morning to take a break between your Zoom meetings. The reality is people are still driving. They’re not changing their behavior in terms of, ‘nope, I’m going to walk to work. I’m going to use public transportation.’ Part of it is a lot of public transportation isn’t fully up and operational back to rush hour times like they were pre-pandemic. I think we have to factor that in. So if you’re saying is driver behavior changing compared to 2019, maybe a little bit, but that was due the pandemic.

Jeff Lenard:
That’s exactly what consumers told us. There’s still about the same percentage of people who are filling up in the morning. It’s pushed back a little later and it’s exactly what you’re saying. It’s that 10:00 am grocery shop, not the 8:00 am drive into the office. John, I want to go back to what you had mentioned earlier about our consumer surveys. We used to do monthly consumer surveys where we asked what would gas prices have to be to somewhat change your behavior and to significantly change your behavior? At the time I used the line that it’s like that scene in the movie ‘Poltergeist’ where somebody’s running down the hall and the hall keeps extending. And that’s exactly what we saw with consumers talking about gas prices.

Jeff Lenard:
They said that it did matter what the price was. It was always a dollar higher that they’d somewhat change behavior. And it was $2 higher that they’d significantly change behavior. Basically what you’re saying is that probably holds true if for no other reason that they have to drive, run errands, take the kid to soccer practice. And because of that the average American is driving 33 miles a day, just like they did before the pandemic.

John Eichberger:
You and I have always said people are going to tell you different things when you ask them questions. The data supports what they’ve said. I’ve looked at the data over 20, 30 years, I’ve looked at the data from individual stores. The consumption of fuel doesn’t change when prices go up materially. If there’s a sharp spike in prices, yes, you’re going to see a reaction in the market. But over time it doesn’t really change. And to Paige’s comment, they’re not just telling us they’re shopping and buying at different times—they are driving at different times. Inrix has data on tracking people’s travel and I’ve looked at it. It is not huge, but there is a shift to later in the morning when most miles are being driven. People’s behavior has changed because of the pandemic, because of lifestyle changes. When people tell you something, test it with the data. And what I’ve seen is what they’re telling us is pretty true and they’re not going to dramatically change their behavior because of gas prices.

Paige Anderson:
And Jeff, one thing to put in perspective that I I think is a little bit different than prior instances of dramatic increases in gas prices is we’re in a very high inflationary period. We’ve got huge supply chain disruptions and challenges. And so you’ve seen hourly rates go up dramatically, particularly in essential businesses. You’ve seen the cost of milk, bread, all products across the line have gone up. Consumers have always tried to balance their checkbooks and how much they have to spend a month and what’s most important. And the reality is, gasoline is something that’s the number one thing after housing of what folks have to buy. And so you’re going to find folks cutting their budgets elsewhere, not necessarily on fuel because as John said, they’ve got to get to work and do the errands and get their kids to soccer practice.

John Eichberger:
And I think the other big thing the surveys we did showed that that gas price sign is a huge bellwether of consumer sentiment—70% to 85%, no matter what the price was during that five-year survey period, they always said gas prices had a significant effect on their feelings about the economy. Add to what Paige said with inflation, everything else going on, the consumer sentiment and the economy has got to be taken and that’s going to have repercussion across economy, not just in terms of transportation energy.

Jeff Lenard:
You don’t have to look at the stock ticker to have a positive or negative feeling about the economy when you drive by and see those gas price signs. For the average consumer that’s probably the most obvious financial indicator of the economy, or misperceived as an indicator of the economy. When we talk about the tipping point and what people might do to change behavior, one thing that comes up is EVs. Interestingly in our consumer survey, we asked people what percentage of all new cars sold are EVs and what percentage of all vehicles on the road are EVs. What they said was 15% of all vehicles on the road. That’s the median number—15% of all cars on the road are EVs. And we know that percentage is less than 1%. So, they kind of missed that, but I think what it does is it shows that the EV commercials, the drumbeat about EVs, has taken hold with consumers. So that’s one thing. And then the second thing is, can they do anything about it? Can they buy new EVs? I’ll start with you on that one, John.

John Eichberger:
If you tell people something enough and if everybody’s telling them something, they start to believe it, whether the facts are there or not. Headlines are touting the electric vehicle revolution. I use the term in my presentation all the time—there is no revolution. Revolution is sudden and dramatic, complete change. There is an accelerating evolution but the fact of the matter is that electric vehicles hit 4% of sales last year/end of the year. And they’re on an upper trajectory. However, what we’re hearing in the news, all the pledges from the OEMs, all the forecast projections, those are really predicated on a perfect market on a supply system that’s not disrupted, on a production strain that’s not disrupted. When was the last time anybody made a multi-year plan that didn’t have disruption? People can say, ‘but John, the supply chain and the microchip shortage last year, those were anomalies.’

John Eichberger:
Sure—supply chain is still problematic. And with the microchip shortage, it’s going to get worse. Ukraine produces 70% of the world’s neon. Neon is a critical ingredient to producing microchips. And so the unforeseen unexpected disruptions that have a major impact on production strains are never taken into consideration when you’re making these 2030, 2035 pledges or these forecasts. And it’s going to have a disruptive effect. So EVs are going to continue to gain market share, but it’s not going to be nearly as rapid as some of the advocates think it’s going to be because of natural progression of market. It takes a lot of time even if you’re able to buy the vehicles, which right now supply constraints makes it very difficult to find an electric vehicle if you want to buy one.

Paige Anderson:
I would say with consumers, obviously there is more of a positive impression that consumers now have of EVs than they did say even five years ago, 10 years ago. There’s the cool factor, the technology factor. There’s the fact that there’s so many different choices out there. So if you like driving a smaller SUV and you don’t want that tiny car, the OEMs have an EV design of that. And so you’re seeing more options, more education, but as John said the reality is even if you went to a car dealership right now and had the money and wanted to buy yourself an EV, they’re not available. There’s a 12-24 month waiting list to purchase it. And it’s not just EVs, it’s also smaller economy or high efficiency vehicles. Also there’s a premium extra rate because of supply and demand issues to purchase that vehicle. So cost is still a factor and range anxiety improvements are also getting better. It used to always be well, what’s the challenges to getting EVs in the marketplace. And it was usually cost, range anxiety and consumer choice for the type of vehicle were the three key issues. You’re seeing all of these addressed, but as John said, it’s not going to happen overnight. It’s going to be an evolution to get there, not a revolution.

John Eichberger:
Paige, you made a great point and Jeff, saying that consumers are interested. They’re very interested. And the industry has done a great job of educating them and bringing electric vehicles into reality for them as an option. But one of the proof points last year, we were supposed to have I think dozens of new electric vehicles brought to market—18 or 19 models registered a sale in the electric vehicle space in 2021. We had an increase in units sold, but the number of models did not diversify like we anticipated. But to Paige’s point, we’re going to have vehicles in the body style customers to want to buy. They’re going to have the range that they’re comfortable with. They’re going to be cost efficient and cost competitive. Now you get into infrastructure. And one of the big factors to infrastructure is, sure we can build chargers to satisfy EV driver needs

John Eichberger:
and the EVs will have a list in the vehicle while the chargers are. But if you’re a family on the fence about do I buy an EV or not, and you don’t know where charging infrastructure is already located—because it’s not in your face like gas stations—are you going to feel comfortable that you can get a charge anywhere and whenever you need it, just like you can gasoline? So the infrastructure has to be built up to such a level that the on-the-fence consumer doesn’t question the availability of charging infrastructure. And we’re a long way from that.

Jeff Lenard:
One of the questions we asked in the survey relates exactly to what you were just talking about and has to do with chargers. The Biden administration has talked about 500,000 EV chargers to move us forward with EVs. And we asked where should they be located? And we gave consumers choices. The traditional ones that the charging companies have long touted were restaurants, places like that. And those were very low on the list. The two top things on the list make sense, it fits into where people already fill up. It was interstate rest areas and gas stations. Paige, from your perspective, I assume that’s mostly a good thing except for the interstate rest areas, which might not necessarily provide the competition that we’re seeking.

Paige Anderson:
If you want to deal with range anxiety, it’s not just about distance and having X number of chargers within a certain period of miles. It’s looking that where do consumers drive each day and where they stop to fuel their vehicles and sort of mirroring that transparent, highly fungible liquid fuels market and marrying that up with the EV charging. So if you’re driving the same place to the grocery store, you go to the same diner for breakfast, you go to work every day, you go to the same schools to drop your kids off, you have a place where you fuel your vehicle—you need to mirror that with EV chargers and putting them along the way. It makes sense when you have 116,000 gas stations—why wouldn’t you put an EV charger there? If you can see the gas price sign and you see E15, E10, diesel fuel, and oh, by the way, an electric charger symbol, and that customer knows that where they drive each and every day they can stop charge their vehicle, that’s going to add a comfort level. Right now, most folks charge at home or at work. But the reality is that’s not going to be the only place they’re going to charge in the future. And so the more that you can mirror the things they like in the current market with EV charging, that’s going to be a good thing.

Jeff Lenard:
We talked about the tipping point for price and talked about EVs and what choices people have. I want to end by talking a little bit about the future and summer drive. AAA in its survey said that so far consumers are saying yes, we’re going to do a summer drive. What we found in our survey is consumers said yes, we’re going to go on a summer drive. If you are going to hit the road, it’s still more cost effective than other means. And all the other means of transportation will also face higher oil prices. Jet fuel will cost more. However you plan on traveling, it will cost more because of the higher price of oil. This is not a gasoline price issue. The one thing I liked in seeing our survey results, is we ask why are you taking a summer drive? And we offered choices like because of the fun memories, because it’s cheaper, because it’s more convenient. They said it’s the experience, it’s creating memories. That’s really good news for our industry that people want to hit the road. Since it’s about experience, what might a retailer do to tell that story to consumers?

Paige Anderson:
There’s no doubt that there is a sentimental feeling that everybody’s feeling coming out of the pandemic. You can’t help but watch ‘National Lampoon’s Vacation’ and the big road trip to ‘Wally World’ and stop and see the biggest circle of twine and all those fun things. Each of us has those type of memories and I think retailers who are along the highways where people are going to hit the road, Route 66, whatever it may be or your national parks, marketing to that consumer is going to be a good thing. My husband and I are packing up the dogs and we’re going to be doing a road trip and I hope others do as well.

John Eichberger:
What can retailers do? You’ve got to continue providing the options, the refreshments. I look back on my road trips growing up and we didn’t have all the distractions kids have today, so we were whining and we were complaining in the backseat. Today they’ve got their headphones on, their iPads out and it must be a much quieter trip for the parents than it used to be. And the destination becomes the objective—you think back to the ‘Muppets’ song, getting there is half the fun. I don’t know if that’s the case anymore for the kids, but when you make a stop to get gas, use the bathroom, how are those stores offering the most exciting distractions possible?

John Eichberger:
What kind of foodservice, what kind of snacks, what kind of other type of road trip games might you be able to offer? Can we help break that technology? Now, keep in mind, my parents always went through the desert, so there’d be no Wi-Fi anyways. So I’d be in trouble today regardless. But what can you do to bring those families together and give them some sort of experience they can enjoy together in the car rather than being off in their own world? That’s something that maybe is something they want to think about.

Paige Anderson:
I know that some of our favorite places have great food, clean bathrooms, obviously lots of fueling options and yes, a little grass area that we can take our dogs out and a place to eat outside like a picnic bench so we can have the dog with us. Those are the things I know my family likes to look at with convenience stores. We’re lucky that we have a lot of creative members out there that are doing just that.

Jeff Lenard:
In our survey, 14% or so of people say they use the bathroom and a much higher percentage for those who buy their fuel off the highway. It’s food, gas and bathroom all in one stop. John, I will disagree with you. They still argue. I’ve heard things like she’s breathing my air. It does still exist. [Laughter]. The April NACS Magazine will talk more about what we heard from consumers. But before we leave today, ,e have a trivia question, and the question today is what does the term contango mean? And I will give you guys four choices: 1. a batch of fuel that has too many impurities to sell, 2. a period of price and balances, 3. a brand of fuel common in the 1930s or 4., a dance that traders do after selling a lot more than 1000,000 barrels of volume?

Paige Anderson:
And we’re not allowed to Google that, right?

Jeff Lenard:
We’re not allowed to Google that.

John Eichberger:
I’m going to say it’s a combination. It’s 2. Followed by 4. assuming the price imbalance is in the favor of the traders.

Jeff Lenard:
Well done. It is when crude oil the crude oil market near-term prices are lower than longer dated ones. So that’s what happened two years ago in 2020 in April and May. And of course the opposite is backward dated when near-term prices are higher than longer dated ones. So, we hope prices are lower and we hope they’re going down because that’s always good for business.

Outro:
Convenience Matters is brought to you by NACS and produced in partnership with Human Factor. For more information, visit convenience.org.

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