Are fuel stations fading into insignificance?

By Szabolcs Nemes and Thorsten de Boer

The traditional fuel retail industry stands at a pivotal crossroads. While the broader oil and gas sector navigates geopolitical volatility and market transformations, multiple forces are reshaping fuel retail, with the potential to disrupt the entire value chain. The path forward is challenging but changing consumer trends in food and retail offer valuable new opportunities.

Improvements in internal combustion engine (ICE) efficiency, accelerating electric vehicle (EV) adoption rates, and the anticipated peak in traditional fuel demand are making established business models increasingly untenable. EVs alone create a dual disruption: they eliminate gasoline and diesel sales volumes while simultaneously shifting the locus of energy replenishment away from fuel stations: When EV charging happens at home, at work, or at other infrastructures, it fundamentally undermines the traditional fuel station's core function.

Why fuel stations must rethink their approach

The transition strategy presents a major challenge. Replacing lost fossil fuel sales with biofuel or electricity sales is theoretically possible, but only to a limited extent, especially at existing fuel stations. Meanwhile, the non-fuel retail margin, historically the industry's lifeline, is becoming increasingly misaligned with customer expectations and market dynamics.

It isn’t just vehicles – traditional convenience store categories are also undergoing significant change. Cigarettes and carbonated drinks – historically accounting for over half of fuel station retail sales – are declining at a category level. And food service offerings at fuel stations have failed to keep up with the rapidly changing food service landscape and shifting consumer expectations. Meanwhile, ancillary services such as mobile top-ups are increasingly digitalized, reducing footfall and revenues for fuel station operators.

The infrastructure that once defined modern road travel is increasingly at risk of losing relevance.

Consumer expectations reshape convenience

Motorists and non-motorists alike are living increasingly hectic, time-constrained lifestyles and their demand for convenience-oriented products and services continues to rise.

The key consumer trends reshaping this landscape are clear: sustained demand for physical proximity, growing appetite for ready-to-eat and ready-to-heat meals, increased online ordering and food delivery options, and increasing emphasis on food provenance and sustainability.

Where do opportunities lie?

These changing consumer needs and emerging market trends create multiple opportunities for players in the convenience or food service sectors as well as for those operating in adjacent markets. Fuel station operators can tap into these trends, accelerating their transformation from traditional fuel stations with peripheral non-fuel business to leading convenience and food service destinations.

Beyond value creation for consumers, this shift also offers substantial opportunities for enhancing shareholder value: multiples in grocery retail and food service are significantly higher than in oil and gas.

Evolving the retail format will be vital to address the new value equation, not only to protect non-fuel market share, but also to succeed in a post-fossil-fuel world. There are multiple ways to achieve this, including strengthening core retail and food offerings, diversifying products and services, exploring non-fuel mobility options, and embracing new partnerships and disruptive innovation.

For an in-depth guide to creating a new, more resilient retail model at fuel stations, download the full study below.

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