High gasoline prices have changed consumers' overall spending behavior more than any other economic factor and that is particularly true at the pump, where consumers say they will significantly change their purchasing behavior to save as little as one cent per gallon.
Nearly half of all consumers polled say that high gasoline prices have significantly affected their spending behavior, nearly double that of any other economic concern, according to a consumer survey conducted by NACS, the association that represents the convenience and petroleum retailing industry.
|
Factors that have a very significant effect on consumers spending behavior |
Percent |
|
High gas prices |
45 |
|
Rise home energy costs |
26 |
|
Rising food costs |
24 |
|
Slowdown in the economy |
22 |
|
National mortgage and lending crisis |
13 |
(Consumers could select more than one option)
NACS annually develops an online gas price kit to explain the variables leading up to the petroleum industryÍs transition to summer-blend fuels. This is the second year that NACS also has conducted a national consumer study -- 2008 NACS Consumer Fuels Report -- to examine their behavior and perceptions related to gas prices. (Unless otherwise noted, all statistics are from the 2008 NACS Consumer Fuels Report.)
Consumer concerns over high gas prices have significantly changed how consumers shop for gasoline. Today, nearly three-quarters of all consumers say that price is the main factor in selecting where they purchase gas. This is a dramatic shift from just a few years ago. A 2000 NACS consumer survey found that location was the main factor for consumers in selecting where they shop for gasoline. And in 2007, 66 percent of consumers said that price was the main factor. Today, price is more important that location by nearly a 5 to 1 margin.
| What is the most important factor in buying gasoline? |
Percent |
|
Price |
73 |
|
Location |
16 |
|
Brand |
10 |
Not only will most consumers shop based on price, nearly one in three will inconvenience themselves -- at a convenience store -- to save a penny a gallon. The average fill-up is in the 10- to nearly 12-gallon range, NACS estimates, meaning that consumers say they will significantly change their purchasing behavior to save roughly 10 cents on a $30 to $35 fill-up (based on gasoline prices at approximately $3 per gallon in late January 2008).
|
What would you do to save one cent per gallon? |
Percent |
|
Take a left-hand turn across a busy street |
32 |
|
Pay by cash inside the store |
31 |
|
Drive 5 minutes out of my way |
23 |
|
Drive 10 minutes out of my way |
15 |
(Consolidates responses to series of four questions; consumers could select more than one response)
Some consumer behavior to save money could have the opposite effect. Nearly one-third of consumers say they would drive 10 minutes out of their way to save 3 cents per gallon. Assuming that the car gets a robust 30 miles per gallon at 45 miles per hour, this 20-minute roundtrip to save approximately 30 to 35 cents would consume a half-gallon of gasoline, or $1.50 when a gallon cost $3.00.
|
What would you do to save 3 cents per gallon? |
Percent |
|
Take a left-hand turn across a busy street |
51 |
|
Pay by cash inside the store |
49 |
|
Drive 5 minutes out of my way |
42 |
|
Drive 10 minutes out of my way |
29 |
(Consolidates responses to series of four questions; consumers could select more than one response)
Consumer price sensitivity has intensified competition among retailers, resulting in declining gross margins on gasoline. In 2007, the average gross margin on a gallon of gasoline was 13.8 cents according to data from the Oil Price Information Service. However, NACS estimates that the after factoring in costs (including credit card fees), the break-even mark-up for a gallon of gasoline is 12 to 13 cents per gallon, leaving gas retailers with an average profit of one to two cents per gallon. In addition, higher costs have increased expenses as retailers must pay more for fuel inventory, often resulting in additional interest payments on lines of credit. Further, most distributors of both fuel and in-store goods charge fuel surcharges, sometimes as high as 20 percent.
Retailers also face rising costs as prices climb. Consumers are more likely to pay by plastic when prices increase. When consumers pay for their motor fuel by credit card, retailers pay credit card fees that typically average 2 to 3 percent. That means that credit card fees cost retailers 6 to 9 cents a gallon when gasoline is $3 per gallon. In 2006, credit card fees at convenience stores surpassed convenience store industry profits. According to the 2007 NACS State of the Industry report, credit card fees for convenience stores were $6.6 billion in 2006, while industry profits were only $4.8 billion. These fees are expected to be even higher in 2007 when data is released in April 2008.
In addition, when fuel prices rise consumers are less likely to purchase in-store items that have healthier gross margins than gasoline. In-store sales are critical for convenience stores. Motor fuels (gas and diesel fuel) sales accounted for more than two-thirds of the convenience store industryÍs sales in 2006 (71.3 percent). However, because of low margins, motor fuels sales contributed only about one-third of total store gross margins dollars (33.9 percent), according to NACS data.
|
When gas prices rises, how do you change your behavior? |
Percent |
|
A lot more likely to shop for best gas price |
40 |
|
Much more likely to pay by debit or credit card |
36 |
|
Buy fewer items inside the store |
21 |
(Consolidates responses to series of three questions; consumers could select more than one response)
While consumers are changing how they purchase gasoline, they are less likely to change how -- or even if -- they drive.
|
When gas prices rises, how do you change your behavior? |
Percent |
|
Bought a more fuel-efficient car in past year |
19 |
|
Considered buying a more fuel-efficient car in past year |
19 |
|
More likely to walk |
18 |
|
Drive a lot less |
17 |
|
More likely to use mass transit |
12 |
|
More likely to ride a bike |
9 |
(Consolidates responses to series of five questions; consumers could select more than one response)
While most consumers currently indicate that they havenÍt significantly changing their driving habits, they do say that if gasoline prices increase they might change their behavior. When asked to name what price would make them change their behavior, the mean consumer response was that $3.71 per gallon would make consumers significantly cut back their fuel purchases.
|
What price would make you significantly cut back? |
Percent |
|
I have already cut back |
13 |
|
$3.25 |
50 |
|
$3.50 |
14 |
|
$3.75 |
5 |
|
$4.00 |
6 |
|
$4.25 or more |
8 |
(Responses given in 25 cent increments; do not total 100 percent because some respondents did not respond to question or did not provide a price)
Consumers think that retailers make considerably more profit than they actually do. When asked how much retailers make in profit -- after subtracting costs, including rent, insurance andæ all other fees -- consumer response averaged 65 cents -- more than 60 cents higher than actual retailer profits, which average one to two cents over the course of a year.
|
When gas is $3, how much profit does a retailer make on a gallon? |
Percent |
|
0-5 cents |
14 |
|
6-10 cents |
8 |
|
11-50 cents |
21 |
|
51 cents to $1 |
13 |
|
More than $1 |
16 |
(Chart compiles open-ended responses; total does not add to 100 percent because some did not respond to question)
A stunning 16 percent of those surveyed think that retailers make at least $1 per gallon in profit. Interestingly, while consumers overstated retailer profits, they also thought that a ñfairî profit was 59 cents
|
When gas is $3, what is a fair profit for retailers? |
Percent |
|
0-5 cents |
12 |
|
6-10 cents |
10 |
|
11-50 cents |
21 |
|
51 cents to $1 |
12 |
|
More than $1 |
9 |
(Chart compiles open-ended responses; doesn't add to 100 percent because some did not respond to question)
While consumers think that retailer profit on a gallon of gasoline is about 22 percent of the cost (itÍs actually less than 1 percent) consumers don't blame retailers for high prices. The corner gas station/convenience store, so often the outlet for consumer ire over high prices, is not perceived as the cause of consumersÍ pain. When given nine possible explanations for higher prices, consumer said that gas stations increasing profits was the least important factor. And when asked to pick the main reason why gasoline prices increase, only one in 25 consumers said it was gas stations profiteering.
|
Which are very important factors for rising gas prices? |
Percent |
|
Manipulation of prices by OPEC |
55 |
|
Lack of government oversight |
54 |
|
Oil companies increasing profits |
53 |
|
Global conflicts |
45 |
|
Oil speculators |
34 |
|
World is running out of oil |
32 |
|
Increased demand in Asia |
32 |
|
Environmental regulations |
23 |
|
Gas stations increasing profits |
19 |
(Consumers could select more than one option)
|
Which is the most important factor for rising gas prices? |
Percent |
|
Oil companies increasing profits |
17 |
|
Manipulation of prices by OPEC |
14 |
|
Lack of government oversight |
14 |
|
Global conflicts |
10 |
|
Increased demand in Asia |
8 |
|
Oil speculators |
7 |
|
Gas stations increasing profits |
4 |
|
World is running out of oil |
3 |
|
Environmental regulations |
2 |
(Total does not add to 100 percent because some did not respond to question)
Right or wrong, consumers blame the major oil companies for high gasoline prices. But while they donÍt blame the local gas station/convenience store, consumers also think that the local store is owned by a major oil company.
Convenience stores sell the overwhelming majority of the gasoline purchased in the United States, an estimated 82 percent in 2006, and despite canopies that promote a specific brand of gasoline, very few of these stores (less than 3 percent) are owned and operated by one of the integrated, major oil companies.
While it is much more likely that the convenience store/gas station is owned by an independent entrepreneur who lives in the community, consumers say that 70 percent of these stores are owned by a major oil company.
Only 2 percent of consumers correctly said that 0 to 5 percent of gas stations are owned and operated by major oil companies. And 40 percent of consumers think that major oil companies operate at least three-quarters of the countryÍs gas stations.
|
What percentage of retail gas locations do you think are owned and operated by major oil? |
Percent |
|
0-5 |
2 |
|
6-10 |
2 |
|
11-25 |
5 |
|
26-50 |
15 |
|
51-75 |
16 |
|
76-100 |
40 |
(Total does not add to 100 percent because some did not respond to question)
The results from the 2008 NACS Consumer Fuels Report were released February 2, 2008. To understand consumer opinions on a variety of gas-related issues, Penn, Schoen and Berland Associates LLC conducted 1,215 telephone interviews with adult Americans from December 26, 2007, to January 4, 2008. The margin of error for the entire sample is +/- 2.8 at the 95 percent confidence interval and higher for subgroups. Reporters should contact NACS Vice President of Communications Jeff Lenard at (703) 518-4272 for more detail or insights from the report.