Over the past six months, economic conditions have worsened on virtually every level, with housing prices plummeting, the stock market shedding value, unemployment worsening and consumer confidence indicators falling to all-time lows. The lone good news for consumers has been relief at the pump in gas prices, which dropped from $4.11 per gallon on July 17 to sub-$2.00 since late November 2008. Despite the lower cost per gallon, consumers still say that gas prices have affected their spending behavior more than any other economic concern, according to the 2009 NACS Consumer Fuels Report, released on February 2, 2009.

Now in its third year, NACS surveyed consumers to learn how they shop for gas, what would change their behavior and how they perceive the petroleum retailing industry. The survey is a central component of the annual NACS Gas Price Kit that explains the variables leading up to the industry’s transition to summer-blend fuels.

Below are top-line findings about consumers and their price sensitivity at the pump. Unless otherwise noted, all statistics are from the 2009 NACS Consumer Fuels Report.

Consumers are more sensitive to gas prices than other top economic concerns.
Even though gas prices averaged approximately $1.70 per gallon during the time period the survey was conducted, consumers have not forgotten the pain of $4.00 gasoline. In fact, consumers in early 2009 were more concerned about gas prices than they were in early 2008, when gas prices averaged around $3.10 per gallon. In addition, every survey demographic identified (age, gender, income, type of vehicle driven) identified gas prices as the factor that most affected their spending behavior.

(Consumers could select more than one option)

Price is the deciding factor when consumers choose your store.
Price remains the dominant reason why consumers by gas at a particular location. Consumer preferences for price have held remarkably steady over the past three years, no matter what the price. Prices have varied wildly the first week of January each of the past three years, but consumer preferences for price above all else has remained consistent. In 2007, gas prices averaged $2.33 the first week of January (Jan. 1), in 2008 they were $3.11 (Jan. 7), and this year they were $1.68 (Jan. 5). (Source: U.S. Energy Information Administration)

 

Consumers change their behavior to save a few cents per gallon.
Consumers are likely to “inconvenience” themselves if they think they can find a better “deal” for their gas. This includes driving across the street, driving 5 or 10 minutes out of their way or paying by cash inside the store.

(Consolidates responses to series of four questions; consumers could select more than one response)

To save three cents per gallon, more than a quarter of all consumers would drive 10 minutes out of their way. Would this actually save them money? 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 36 cents (a typical fill-up is about 10-12 gallons) would consume a half-gallon of gasoline, or $1.00 when a gallon cost $2.00.

(Consolidates responses to series of four questions; consumers could select more than one response)

For a five-cent savings, more than half of all consumers would select each of the options presented, and approximately three-quarters of all consumers (72 percent) said that they would pay cash for their fuel if they could save as much as five cents per gallon.  

(Consolidates responses to series of four questions; consumers could select more than one response)

While a high percentage of consumers say they will change their behavior to save a few cents per gallon, the overall percentage of consumers who actually do so is down compared to 2008.

Consumers have different shopping strategies at different price levels.
When gas prices rise, consumers are much more price sensitive. This is why retailers are reluctant to pass along wholesale price increases: they know that consumers are more likely to seek someone with a lower price. As a result, retailer margins shrink or even become negative when gas prices increase. In addition, retailers often see a decrease in in-store sales.

(Consolidates responses to series of three questions; consumers could select more than one response)

While consumers are less price sensitive when gas prices fall, 4 in 10 consumers are still shopping for the best deal. In addition, the extra money in consumers’ pockets doesn’t necessarily translate into greater in-store sales. Only one in every 11 consumers buys more inside the store when gas prices fall.

(Consolidates responses to series of three questions; consumers could select more than one response)  *Did not ask this question in 2008

Retailers fight to get consumers to the pump and inside the store.
A retailer’s gas prices are the primary attraction for consumers to shop the store. Retailers fight to get consumers to the pump, knowing that a consumer going elsewhere for fuel is not going to stop in their store to purchase other items. That is why gas margins continue to remain slim. More than 70 percent of convenience store sales are from gas, but only 34.5 percent of profits are generated at the pump. However, once a consumer decides to purchase gas at a location, retailers may have several options to get them inside the store.

 

Despite price sensitivity, consumers say they would pay extra for renewable fuels.
While consumers remain incredibly price sensitive with respect to gas prices, there may be some opportunity for retailers to differentiate themselves by offering renewable fuels. Half of all consumers said they would buy renewable fuels (such as biodiesel, hydrogen, E85, etc.), and they would pay extra for it.

 

Sixty-one percent of consumers age 18 to 34 said that they would pay more for alternative fuels compared to 33 percent who said that they would not.

If you would pay more for alternative fuels, how much more would you pay?

• Overall: 10 cents
• Ages 18-34: 20 cents
  (median response; open-ended question)

However, while consumers said that they would buy alternative fuels, this is reflective more of future potential than a current opportunity, since less than 3 percent of the current U.S. fleet is capable of using E85 (there were 7.3 million flexible fuel vehicles in the U.S. as of August 2008) and other fuels (hydrogen, etc.) are much less available at the retail level.

Methodology for the 2009 NACS Consumer Fuels Report
The results from the 2009 NACS Consumer Fuels Report were released February 2, 2009. To understand consumer opinions on a variety of gas-related issues, Penn, Schoen and Berland Associates LLC conducted 1,100 telephone interviews with adult Americans from December 23, 2008, to January 12, 2009. The margin of error for the entire sample is +/- 2.95 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.