The United Nation’s (UN) recent report on the impending changes the world is facing as a result of climate change may boost interest in electric vehicles (EVs). While the idea of driving a car that isn’t spewing damaging CO2 might be attractive, there are concerns about adopting EV technology, especially with regard to the infrastructure needed to support a widespread shift, and more specifically the availability of charging stations. Research shows that in countries where EV uptake is relatively high, many people rely on home charging, but having alternative options is important especially in countries like the United States where driving distances can be long. One potential solution is to add EV chargers to traditional gas stations. Indeed, major energy companies including BP and Shell, recognizing that their days of depending primarily on fossil fuels for profits will eventually come to an end, are already adding electric charging stations to their properties. While companies like Shell and BP are unlikely to move away from their traditional gas stations any time soon, just adding electric charging stations to their stores introduces a new complexity to generating profits.
In addition to facing high charging fees along with potential competition from utility companies offering their own charging stations, traditional energy companies will also likely feel the effects of the lower returns associated with EV-charging sales and convenience store sales as compared to higher returns from oil and gas exploration. Finding new avenues to boost profits will be important. One such avenue might be the onsite convenience store. In an industry where conveniences store sales can make up a significant portion of the profits earned from a refueling stop, further increasing those profits could be vital. Together, BP and Shell already sell as much coffee as about 10 percent of Starbucks’ global coffee sales. Suppose that could be boosted further and additional products could be sold as well. Consider that a typical stop for gas takes just a few minutes. Depending on the situation, a customer might buy gas and possibly a coffee or a snack from the onsite convenience store. In contrast, a typical stop to charge an EV might last 25 minutes, creating new opportunities to sell to customers looking for something to do while they wait. Indeed, the onsite convenience store of the future could be very different from that of today. Going forward, identifying ways to encourage customers to leave their vehicles and come inside to shop could be important to future profits.
Discussion Questions:
1. As the world reduces its dependency on fossil fuels, energy companies will need to offset declines in oil and gas sales with other businesses. Discuss how EV charging stations and increased offerings at onsite convenience stores could offer a hedge against declining oil and gas profits.
2. While conversations about the need to move away from fossil fuels abound, actual movement has been slow. Reflect on the risks that energy companies face as the world transitions from oil and gas to alternative energy forms. What risks do companies like Shell and BP face as they convert their traditional gas stations to gas and electric charging stations?
3. Consider the future of convenience stores. What changes do you anticipate as refueling stops become longer recharging stops? What are the implications of those changes for other businesses such as fast food restaurants and supermarkets? Consider your response from various perspectives including price, choice, and profit.
Sources| McKinsey: https://www.mckinsey.com/industries/oil-and-gas/our-insights/the-big-choices-for-oil-and-gas-in-navigating-the-energy-transition; WSJ: https://www.wsj.com/articles/big-oil-prepares-for-upheaval-at-the-gas-station-2c7240a6; IEA: https://www.iea.org/reports/the-oil-and-gas-industry-in-energy-transitions; CNN: https://www.cnn.com/2022/10/18/business/ev-chargers-convenience-store/index.html; Photo by John Cameron on Unsplash