Business

05.05.13

Farewell to the Gas Station: The Demise of a Car-Culture Icon

Americans’ fuel consumption is dropping—and so is the number of spots to fill up. From electric vehicles to natural-gas-powered fleets and Costco, a look at the culprits.

Say goodbye to the good old American gas station.

In April, The Wall Street Journal reported that the gas station on the corner of Houston Street and Lafayette in lower Manhattan—now a BP but formerly the iconic Gaseteria—would likely be closing soon. The city’s Landmarks Preservation Commission approved a plan to knock it down and put up a seven-story building on the site it occupies. Last week, The Washington Post reported that gas stations are disappearing from D.C.’s close-in suburbs. “Along busy Wisconsin Avenue [in Bethesda, Maryland], two Exxons and a BP have stopped selling gas or have closed completely, making way for a high-rise apartment building and a new bank,” the Post reported. “A Sunoco, the area’s last Wisconsin Avenue station, is being sold to a developer with plans for a six-floor office building.”

These are not isolated incidents. One hundred years after the first retail gas station opened—a Gulf station in Pittsburgh—gas stations are slowing receding from the American commercial landscape. Every day, in fact, three or four gas stations close up shop. Some, like the BP in SoHo and the stations on Wisconsin Avenue in Bethesda, are victims of high land values in bustling urban and suburban cores. But other factors are in play throughout the country: rising competition from new gas retailers like Walmart and Costco; the growing efficiency of the American vehicle fleet; and changing driving patterns. Americans are driving less than they did a few years ago, too. When they do drive, they’re more likely to drive cars that get better gas mileage. And with each passing month, a growing cadre of drivers gets around without using gasoline at all.

According to the trade publication National Petroleum News, the station count—which includes public fueling stations, marinas, convenience stores, gas stations, and hypermarkets that sell gas (e.g., Costco)—was 156,065 at the end of 2012, down 1,328, or about 1 percent, from 2011. That marked the seventh consecutive year of decline. Since 2002, the station count has fallen by nearly14,000, or about 8 percent.

The trend got started in the 1990s, when hypermarkets—grocery store chains and retailers like Costco and Walmart—began to sell gasoline at their big-box locations, said Jeff Lenard, a spokesperson at the National Association of Convenience Stores. Just as Walmart and other giants put pressure on mom-and-pop grocers and retailers, these huge chains, with their ability to run on low margins, put some low-volume gas stations out of business.

In more recent years, the economy and technology have been working against gas stations. “The volume of gasoline sales peaked in 2007,” Lenard notes. According to the Energy Information Administration, Americans consumed 3.389 billion barrels of gasoline in 2007. But the total has fallen in every year since, down to 3.185 billion barrels in 2012, a decline of 6 percent.

What’s behind the decline? Well, with fewer people working and a decline in goods moving around the country due to the deep recession and weak recovery, vehicles are driving fewer miles than they did before. Broke young Americans aren’t buying cars like they used to. And the persistently high price of gas is pushing more Americans of all ages to use public transportation. According to the Department of Energy, vehicle miles driven peaked in 2008 and were about 2.6 percent below the peak last year.

It’s difficult to imagine that the demand for gasoline will ever return to its peak.

Plus, environmental regulations that require gas-station owners to put in more secure gas tanks have encouraged some owners to get out of the business. And gas stations, like everything else, have become super-sized. Some owners have invested to add pumps to existing stations, the better to compete with larger outfits. And that reduces the need for more free-standing stations.

Meanwhile, as we’ve noted, there’s been a quiet revolution in auto efficiency in the U.S. Forget about hybrids. The SUVs, coupes, and sedans that populate dealer showrooms are much greener than their antecedents. It’s not uncommon for a basic car to get 40 miles per gallon or an SUV to get 30 miles per gallon on the highway. A typical new car now gets about 20 percent better mileage than the typical new car that hit the road in April 2008.

And there’s more where that came from. The Obama administration has issued regulations that require the average new car sold in 2025 to get a whopping 54.5 miles per gallon. Next, consider that gasoline is slowly being abandoned as a transportation fuel. In April, some 7,000 electric cars or plug-in hybrids—Chevy Volts, Nissan Leafs, and Teslas—were sold. Their owners will only stop at gas stations to use the bathroom or buy some Doritos. Meanwhile, everyday commercial fleets are switching their gas-guzzling buses and trucks to run on plentiful, cheap natural gas.

So even if those mandates are never met, and even if Americans start driving again in larger numbers, it’s difficult to imagine that the demand for gasoline will ever return to its peak.

There’s another factor at work. Cities, close-in suburbs, and college towns around the country are all becoming more densely populated and served by new networks of buses, light-rail systems, and bike lanes. That’s pushing people to rethink the best use of properties at prominent intersections. As they look ahead, gas-station owners have to think about the (dwindling) profits they might be able to make from operating the business in the future, and weigh them against the profits they might be able to make from selling the property on which the gas station sits to somebody who might want to use the land for a restaurant, or an office building, or a condo development.

Every day, a few owners look at the trends and look at their monthly results, and decide to throw in the greasy towel.