The Demise of the Gas Station

The EV in my garage is contributing to the death of our local gasoline station. Meanwhile, our second car is keeping it on life support.

Gas Station Economics

Every week or so I fill up my tank.

Fossil Fuel

Adding up to an estimated 374 million gallons of gasoline daily, for every registered vehicle, we typically say, “Fill it up,” 30 times a year. Going up like a rocket and down like a feather, the posted price relates to the trajectory of crude prices. But still, the gas station owner (usually an individual using a national brand) takes home only a 7-cent profit on every dollar we spend. The rest goes for the crude itself, refining, transportation, taxes, station expenses.

As a result, it makes sense that the owner needs a second stream of revenue. Here, we have the convenience store. Getting gas, drivers might step over to the store for a water. Leaving the store, they could be carrying an ice bag, a pork chop sandwich, a beer, and a dozen eggs. Averaging 33 percent margins, the store produces profits.

With gasoline plus the store and the interplay of the station with the one across the street, we have a financial prototype. And now, the EV threatens that entire model.

EVs

In a recent Freakonomics episode, a gas station owner says his charger delivery will arrive during the coming year.

Preparing, he will have to tear up pavement and lay new cables. He will be spending $100,000 for (I am assuming) Level 3 chargers that provide as much as 20 miles a minute. A California station owner said four chargers would have cost him $500,000 without government subsidies. Faster than home chargers, they could become a part of the nation’s new EV infrastructure. Still, they are competing with a new national network of government subsidized chargers and entrepreneurial dreams of charging stations that deplete our time and wallets as we wait.

Perhaps Norway portends the future. As a country where 90 percent of all new cars are EVs or hybrid, Norway’s gas stations installed charging ports. However, EV owners visit them just once a month.

Our Bottom Line: Creative Destruction

We used to have stables and buggy whip makers. Repurposed, they made way for the Model-T and its siblings. Now, pondering the impact of EVs on gasoline stations, we can ask if they will transform themselves or close their (garage) doors.

It all reminds me of how Joseph Schumpeter described creative destruction.

As an academic superstar, an Austrian Finance minister, and a Harvard professor, Joseph Schumpeter once proclaimed that he aspired to become the world’s greatest economist, horseman, and lover. Reputedly, he then said, “Things are not going well with the horses.”

In 1883, Joseph Schumpeter was born in Austria. After working in government, business, and academia, he went to Harvard in 1932–a perfectly timed departure from Europe. Explaining the evolution of capitalism, he attributed its growth to entrepreneurs and its eventual demise to the resentment that would build against its elite.

Schumpeter tells us that entrepreneurs are the source of “creative destruction” because their businesses render others obsolete. With their new products and processes, entrepreneurs create jobs, progress, and productivity. They change consumer habits, develop new means of production, and new forms of economic organization.

Sounds like the impact of EVs on gasoline stations.

My sources and more: Always interesting, Zachary Crockett over at Freeakonomics inspired today’s post. Then, providing more detail, Vox and Electrek told more of the story.