Although their number has decreased, gas stations are not about to be completely wiped off the map with the electrification of transportation, according to observers. Some are already beginning to shift to adapt to the energy transition.
Like Ottawa, Quebec wants to ban the sale of new light combustion vehicles starting in 2035. The Legault government tabled a draft regulation to this effect at the beginning of the summer. It is the subject of a public consultation until August 25.
If this regulation materializes, it would not mean the immediate death of gas stations. Several factors suggest that this sector will play an important role for a long time to come, experts say.
One of the things that will be allowed to happen is that combustion-engine cars sold before the ban came into force will be allowed to remain on the roads.
“A car is functional for a good ten years on average. This implies that the market for automobile gasoline will remain quite active for several years after 2035,” emphasizes Patrick Gonzalez, associate professor in the economics department at Université Laval.
Some categories of vehicles, such as heavy trucks, would be spared from the ban. They will therefore remain major consumers for many gas stations, says Carol Montreuil, vice-president of eastern Canada for the Canadian Fuels Association.
“Light electric vehicles are a small sector of transportation and even if it declines by 2035, 2040 or 2050, there will be a need for liquid fuel for a very long time in Canada,” he says.
In an analysis, the Quebec government presents the impacts of its draft regulation on the oil industry, which includes oil wholesalers, refineries and service stations.
He calculates that 945,000 liters of fuel and 803,000 liters of gasoline will not be sold in 2035. Annual losses in sales and margins are estimated at nearly $495,000, a significant portion of which is related to refineries.
For comparison, gross sales of gasoline for motor vehicles reached more than 8.7 million litres in Quebec in 2022, almost reaching the pre-pandemic level, according to data from Statistics Canada.
Professor Pierre-Olivier Pineau, holder of the Chair of Energy Sector Management at HEC, suggests that 2035 will not be a year of disruption for service stations, but rather one of transition, “which will perhaps make the electrification of transport even more tangible.”
According to him, the downward trend in the number of gas stations should in principle continue. Quebec had 2,779 gas stations in 2022, compared to 2,985 in 2010, according to the latest census by the Régie de l’énergie.
“But it will accelerate with the speed of the (energy) transition and the credibility of this transition. Today, the transition is not entirely credible because gasoline sales are not decreasing. We are not at all on a trajectory that corresponds to the government’s targets,” he qualifies.
Already in adaptation mode
Harnois Énergies, which has more than 450 gas stations in Quebec and the Maritimes, is preparing for 2035. The company makes internal forecasts based on sales of combustion and electric cars.
“Over the next few years, we are perhaps predicting declines of 1%, 2% (in the number of litres sold) until 2030. And after that, there will be greater declines,” says President and CEO Serge Harnois.
It is in this context that the distribution company is diversifying its portfolio of activities by turning in particular to aviation fuels, lubricants and propane. It is also injecting a lot of money to diversify its retail sites.
“It’s tens of millions per year to expand convenience stores, add car washes, restaurants, to add ready-to-eat meals, to add more groceries,” explains Mr. Harnois.
Harnois Énergies hopes that these investments will help avoid closures within its network in the face of a possible decline in gasoline.
“I think our convenience stores will turn into supply points for fast food, ready-to-eat meals […] while also selling gasoline. In 2035, let’s say gasoline sales have dropped by 30%, we hope that these losses will be offset by higher margins and by sales other than gasoline,” explains Mr. Harnois.
Like other gas stations, Harnois Énergies is also adapting to the rise of electric vehicles by installing charging stations.
The Régie de l’énergie is observing a growing number of stations offering this service. There were 130 in 2022, compared to 38 three years earlier. However, the Régie warns that these figures are not representative of reality, given the complexity of counting the different initiatives.
Mr. Harnois notes that the return on investment in charging stations is not there.
“It’s not our bread and butter. Technology is changing so quickly that it’s not easy to make a profit,” he says, noting that the majority of charging is done at home rather than on the road.
Mr. Pineau believes that electricity sales volumes will have difficulty replacing gasoline volumes.
“One of the things that makes the electric car superior is that it uses much less energy. It’s going to be difficult to raise prices to the point where we’re going to make up for lost volumes with higher prices for gas stations.”
“But they know that this is a development that is somewhat inevitable. So, they are starting to position themselves in the electricity sector, to diversify their sources of income with the sale of different products. They are adapting quietly,” the professor analyses.
A doubt persists
It remains possible that the ban will never see the light of day or that its deadline will be pushed back due to economic or political factors, experts said.
According to Mr. Gonzalez, “the year 2035 remains somewhat speculative.”
“It is a bet that several governments in Europe and America are making that the electric car market will be sufficiently developed and affordable to take over.
“Governments are making it clear where they want the industry to go, but it is not a given that the 2035 timetable can be met. Several conditions must be met, including strengthening the electricity supply grid,” he says.
We will also have to monitor the effect of the disappearance of the Quebec government’s financial assistance program for the purchase of an electric car in 2027, says Mr. Montreuil.
“With the end of subsidies, how will consumers react? We see that in countries that have already started to reduce these subsidies, the sale of electric vehicles has fallen drastically,” he says.
On its web page presenting the draft regulation, Quebec indicates that “an assessment of market maturity is planned by the government around 2030, in order to allow for possible adjustments, to guarantee a successful transition in 2035.”
Mr. Gonzalez also believes that “the vehicle fleet transition project has not yet undergone the crucial political test of voters.” There remains a good portion of the population that “has not really been confronted with the dilemma of whether or not to switch to electric.”
“If, as the government hopes, the evolution of the market will have led to significant cost reductions in the world of electric vehicles, that will be fine, but if not, voices will be raised demanding exemptions or a postponement of the timetable,” he thinks.