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Great Fuel Debate - US - January 2009

Aggregate expenditures on gasoline and diesel fuel reached $294.3 billion in 2008, an increase of 93% at current prices since 2003 and 66% at inflation-adjusted prices. However, this impressive gain is the result of increases in the average price per gallon of fuel rather than a surge in demand. In fact, the number of miles driven has declined, and volume sales declined 1% between 2003 and 2007 (and more dramatically in 2008).

Analysis and insights in this report include:

  • Market drivers and opportunities for innovation

  • The role of and growth of "green" vehicles, alternative fuels and other factors influencing the market

  • Ad spending and advertising strategies and themes, including web marketing, and advertising effectiveness by brand

  • Consumer opinions and behavior including data on who buys fuel, what influences purchase behavior at the retail level, and which sources of "green" information are considered trustworthy

  • Cluster analysis to identify consumer groups that are open to rethinking their opinions on energy companies

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Table of contents

  1. Scope and Themes

    • What you need to know
      • Definition
        • Data sources
          • Sales data
            • Consumer data
              • Abbreviations and terms
                • Abbreviations
                  • Terms
                  • Executive Summary

                    • Key points
                      • Economy portends difficult times ahead
                        • Gas is supplied by “Big Oil”
                          • Use of public transportation on the rise
                            • Retail service station market is changing
                              • We’re green!
                                • Vast spends with minimal results
                                  • Drivers cutting back on miles driven
                                    • Regular gas good enough
                                      • Scientists trusted most, “Big Oil” trusted least
                                        • Gas is just gas, no matter who is selling it
                                          • Adults concerned with energy dependence/carbon emissions more open to messaging
                                            • Patriotism alive and well
                                            • Insights and Opportunities

                                                • Invest in U.S. automakers
                                                  • Make service stations “green”
                                                    • Investing in infrastructure for electric, natural gas, and hydrogen fuel cell cars
                                                      • Improve success rates of ads by using trusted third parties
                                                        • Become more retail savvy
                                                          • Increased investment in websites
                                                            • Partnering with public transport
                                                              • Consumer education
                                                                • Opportunities in non-profit work
                                                                • Fast Forward Trends

                                                                  • The Sci-Fi Era
                                                                    • Bio-engineering alternatives to ethanol
                                                                      • Green Technology
                                                                        • The infrastructure problem
                                                                          • Figure 1: U.S. alternative fuel stations by type, 2003-08
                                                                        • Limited access to alternative fuels provides opportunities for branding
                                                                          • Hybrids remain the near-term solution
                                                                            • More green cars on the horizon
                                                                                • Figure 2: U.S. OEM AFV/HEV/Diesel light duty model offerings by fuel type, 2000-08
                                                                              • Demand for gas to decrease in the long term
                                                                              • Competitive Context

                                                                                • Public transportation increasingly important
                                                                                  • Figure 3: U.S. public transportation passenger trips and miles, 2001-07
                                                                                  • Figure 4: U.S. unlinked passenger trips, by mode, third quarter & Jan-Sept 2007/08
                                                                                • Embracing the competition
                                                                                • Market Size and Forecast

                                                                                  • Revenue up on price increases, but demand is declining
                                                                                    • Figure 5: U.S Aggregate consumer expenditure on gasoline/diesel fuel, at current prices, 2003-13
                                                                                    • Figure 6: U.S Aggregate consumer expenditure on gasoline/diesel fuel, at inflation adjusted prices, 2003-13
                                                                                    • Figure 7: U.S motor fuel sales reported by states, in gallons, 2003-07
                                                                                • Segment Performance

                                                                                  • Key points
                                                                                    • Diesel is a niche segment in the U.S.
                                                                                      • Most gas used for local trips
                                                                                        • Figure 8: Aggregate consumer expenditure on auto fuel, by type of fuel, 2006 and 2008
                                                                                    • Segment Performance—Gasoline

                                                                                      • In a nutshell
                                                                                        • Recession to decrease demand and hold down revenue growth
                                                                                          • Sales and forecast—gasoline
                                                                                            • Figure 9: Aggregate consumer expenditure on gasoline, at current prices, 2003-13
                                                                                        • Segment Performance—Diesel Fuel

                                                                                          • In a nutshell
                                                                                            • Diesel now more costly than standard gasoline
                                                                                              • Figure 10: Aggregate consumer expenditures on diesel fuel, at current prices, 2003-13
                                                                                          • Segment Performance—Gasoline for Out-of-town Trips

                                                                                            • In a nutshell
                                                                                              • Growth slows for out-of-town trips
                                                                                                • Figure 11: Aggregate expenditures on gasoline for out-of-town trips, at current prices, 2003-13
                                                                                            • Retail Distribution

                                                                                              • Key points
                                                                                                • More than 5,800 service stations have closed since 2003
                                                                                                  • Figure 12: U.S service station count, 2003-08
                                                                                                • “Big Oil” controls fewer service stations
                                                                                                  • Service stations trading hands
                                                                                                      • Figure 13: Leading branded gasoline retailers, by number of stations, 2005 & 2007
                                                                                                    • Wal-Mart, Costco and other retailers now offer fuel
                                                                                                    • Market Drivers

                                                                                                      • As gas prices rose and the economy sank, miles driven dropped
                                                                                                        • Figure 14: U.S travel on all roads and streets, 2003-08
                                                                                                      • Gas & diesel prices more than doubled between 2003 and 2008
                                                                                                        • Figure 15: U.S. gasoline and on-highway diesel fuel prices, 2003-09
                                                                                                      • Economy
                                                                                                        • Hybrid and green vehicle sales decline in 2008
                                                                                                          • Figure 16: U.S. hybrid & diesel automobiles, volume market share of all car sales, 2006, 2009 and 2015
                                                                                                          • Figure 17: U.S. sales of hybrid vehicles, 2004-08
                                                                                                        • Fuel efficiency relatively stagnant
                                                                                                          • The potential impact of the Obama administration
                                                                                                          • Leading Companies

                                                                                                            • Eight energy companies control three quarters of gallons sold
                                                                                                              • Figure 18: Leading suppliers of gasoline, by volume, 2006 and 2007
                                                                                                          • Brand Qualities

                                                                                                            • Repetition, facts, and simplicity missing from campaigns
                                                                                                              • BP (BP, Amoco, Arco, Gulf)
                                                                                                                • Chevron (Chevron, Texaco, Unocal)
                                                                                                                  • ExxonMobil (Exxon, Mobil)
                                                                                                                    • CITGO
                                                                                                                      • Shell
                                                                                                                      • Innovation and Innovators

                                                                                                                        • Gasoline rebates inspire loyalty but can backfire too
                                                                                                                          • Convenient Payment—Speedpass
                                                                                                                            • Green Gas Stations—BP Helios House
                                                                                                                              • Awareness of BP’s Helios stations is relatively high
                                                                                                                                • Figure 19: Awareness of BP Helios gas station, October 2008
                                                                                                                                • Figure 20: Awareness of BP Helios gas station, by gender, October 2008
                                                                                                                                • Figure 21: Awareness of BP Helios gas station, by age, October 2008
                                                                                                                              • The Hess truck is here…
                                                                                                                                • Co-branding comes to retail gasoline…
                                                                                                                                • Spend on Advertising

                                                                                                                                  • Key points
                                                                                                                                    • Limited efficacy found for corporate re-branding efforts
                                                                                                                                      • Only national brand ads have been seen
                                                                                                                                        • When seen, most ads did not affect purchase frequency
                                                                                                                                          • Figure 22: Advertising awareness and efficacy, by brand, October 2008
                                                                                                                                        • Media spending focused at the corporate level
                                                                                                                                          • Media spending on gas retailing is generally low; gas gets some attention
                                                                                                                                              • Figure 23: Media expenditures for leading petroleum companies/gas stations, 2007*
                                                                                                                                          • Television Advertising

                                                                                                                                            • Themes overview
                                                                                                                                              • Theme—Corporate image
                                                                                                                                                • Figure 24: Television Spot BP, “People talk about oil alternatives,” March 2008
                                                                                                                                                • Figure 25: Television Spot ExxonMobil, “Challenges: Erik, Mark, Neil, Kim,“ June 2008
                                                                                                                                                • Figure 26: Television Spot Chevron, “Crowded Streets, People Boarding a Train,” September 2008
                                                                                                                                              • Theme—Unique qualities in gas offerings
                                                                                                                                                • Figure 27: Television Spot BP, “Animated scientist, black board” June 2008
                                                                                                                                              • Theme—Traditional/station-focused
                                                                                                                                                • Figure 28: Television Spot Phillips 66, “Man’s navigation system demands he turn right,” February 2008
                                                                                                                                                • Figure 29: Television Spot Unocal, “Man wins free gas for life at a slot machine gas pump,” June 2008
                                                                                                                                            • Web Marketing

                                                                                                                                              • Introduction
                                                                                                                                                • BP
                                                                                                                                                  • ExxonMobil
                                                                                                                                                    • Shell
                                                                                                                                                      • Chevron
                                                                                                                                                      • Fuel Buyers

                                                                                                                                                        • More than eight in 10 adults purchase gas/diesel fuel
                                                                                                                                                          • Figure 30: Gasoline/diesel purchasers, by age, household income, and marital status, April 2007-June 2008
                                                                                                                                                          • Figure 31: Gallons of gasoline/diesel bought in past month, by gender and age, April 2007-June 2008
                                                                                                                                                      • Miles Driven

                                                                                                                                                        • The average adult drives nearly 560 miles a month
                                                                                                                                                          • Figure 32: Number of miles driven per month, by gender, age, household income, region and presence of children, October 2008
                                                                                                                                                        • About one in five adults do not know how many miles they drive
                                                                                                                                                          • Figure 33: Awareness of miles driven per month, by gender, age, household income and number of people in household, October 2008
                                                                                                                                                      • Gas Mileage

                                                                                                                                                        • Average MPG is relatively consistent across demographic groups
                                                                                                                                                          • Figure 34: MPG, by age and HH income, October 2008
                                                                                                                                                        • About one in five drivers do not know their average MPG
                                                                                                                                                          • Figure 35: Awareness of MPG, by gender, age, household income and region, October 2008
                                                                                                                                                      • Gas Grade Preferences

                                                                                                                                                        • Regular gas prevails
                                                                                                                                                          • Figure 36: Incidence of buying gasoline/diesel, by grade/diesel, 2002-08
                                                                                                                                                        • Premium grades favored by higher-income households
                                                                                                                                                          • Figure 37: Incidence of buying gasoline/diesel, by grade/diesel, by gender, age and household income, April 2007-June 2008
                                                                                                                                                      • Trusted Information Sources

                                                                                                                                                        • Introduction
                                                                                                                                                          • Scientists and friends trusted; energy companies and celebrities are not
                                                                                                                                                            • Figure 38: Level of trust in sources of information about energy and the environment, October 2008
                                                                                                                                                          • Older adults more skeptical
                                                                                                                                                            • Figure 39: Rarely or never believe in sources of information about energy and the environment, by age, October 2008
                                                                                                                                                            • Figure 40: Usually believe in information sources about energy and the environment, by age, October 2008
                                                                                                                                                        • Perceived Value of Brand/Fuel Grades

                                                                                                                                                          • Most adults view fuel as commodity item
                                                                                                                                                            • Men place more importance on high quality of fuel
                                                                                                                                                              • Figure 41: Perception of fuel quality, by gender, October 2008
                                                                                                                                                            • Higher-income adults more likely to think fuel quality use is important
                                                                                                                                                              • Figure 42: Perception of fuel quality, by household income, October 2008
                                                                                                                                                          • How Gas Stations are Selected

                                                                                                                                                            • Patriotism trumps price
                                                                                                                                                              • Figure 43: Factors in gas station selection, October 2008
                                                                                                                                                            • Older adults want to buy American and shop locally
                                                                                                                                                              • Young adults more driven by convenience of location
                                                                                                                                                                • Figure 44: Factors in gas station selection, by age, October 2008
                                                                                                                                                              • Income has limited influence on station selection
                                                                                                                                                                • Figure 45: Factors in gas station selection, by household income, October 2008
                                                                                                                                                            • Tech at the Pump

                                                                                                                                                              • Introduction: Cash is king
                                                                                                                                                                • New payment technologies interest men, younger adults
                                                                                                                                                                  • Figure 46: Payment method preferences, by gender, October 2008
                                                                                                                                                                  • Figure 47: Payment method preferences, by age, October 2008
                                                                                                                                                                • Video screen acceptance
                                                                                                                                                                  • Figure 48: Attitudes towards video screens at the pump, by age, October 2008
                                                                                                                                                              • Personal Behavior, Oil Dependency and the Environment

                                                                                                                                                                  • Figure 49: Expected and declared changes in mileage driven, by age, October 2008
                                                                                                                                                                • Price influences demand for lower-income households
                                                                                                                                                                  • Figure 50: Expected and declared changes in mileage driven, by household income, October 2008
                                                                                                                                                                • Wealthiest most committed to reducing oil dependency, emissions
                                                                                                                                                                  • Figure 51: Interest in reducing oil dependency, carbon emissions, and interest in public transportation, by household income, October 2008
                                                                                                                                                              • Investment Choices and Government Policy

                                                                                                                                                                • Introduction
                                                                                                                                                                  • One third of adults will not buy stock in big energy companies
                                                                                                                                                                    • Figure 52: Aversion to investing in “Big Oil,” by household income, October 2008
                                                                                                                                                                  • Only 11% think energy companies belong in their investment portfolio
                                                                                                                                                                    • Figure 53: Interest in investing in energy companies, by household income, October 2008
                                                                                                                                                                  • Tax, baby, tax
                                                                                                                                                                    • Figure 54: Attitudes towards taxes on energy companies and on consumers at the pump, October 2008
                                                                                                                                                                  • Most worried about reliance on fossil fuels, but less clear about solutions
                                                                                                                                                                    • Figure 55: Energy policy opinions, October 2008
                                                                                                                                                                  • “Drill baby drill!” resonates with 55+ but not with those under age 35
                                                                                                                                                                    • Figure 56: Energy policy opinions, by age, October 2008
                                                                                                                                                                  • Higher-income adults more worried about U.S. reliance on fossil fuels
                                                                                                                                                                    • Figure 57: Energy policy opinions, by household income, October 2008
                                                                                                                                                                  • Ethanol and E85 are not well known/understood
                                                                                                                                                                    • Figure 58: Attitudes to ethanol and E85, October 2008
                                                                                                                                                                    • Figure 59: Attitudes to ethanol and E85, by gender, October 2008
                                                                                                                                                                    • Figure 60: Attitudes towards ethanol and E85, by household income, October 2008
                                                                                                                                                                • Alternative Fuel/Vehicle Preferences

                                                                                                                                                                  • To save money, many adults would modify their cars
                                                                                                                                                                    • Few currently own flex fuel vehicles
                                                                                                                                                                      • Figure 61: Attitudes towards alternative fuels, October 2008
                                                                                                                                                                      • Figure 62: Attitudes towards alternative fuels, by gender, October 2008
                                                                                                                                                                  • Impact of Ethnicity/Hispanic Origin

                                                                                                                                                                    • Fuel buyers
                                                                                                                                                                      • Figure 63: Gasoline/diesel purchasers, by ethnicity/Hispanic origin, April 2007-June 2008
                                                                                                                                                                    • Average gallons purchased per month
                                                                                                                                                                      • Figure 64: Gallons of gasoline/diesel bought in past month, by Ethnicity/Hispanic origin, April 2007-June 2008
                                                                                                                                                                    • Awareness of miles driven
                                                                                                                                                                      • Figure 65: Do not know miles driven per month and MPG, by ethnicity/Hispanic origin, October 2008
                                                                                                                                                                    • Premium grades favored by minorities
                                                                                                                                                                      • Figure 66: Incidence of buying gasoline/diesel, by grade/diesel, by Ethnicity/Hispanic origin, April 2007-June 2008
                                                                                                                                                                    • Minorities less likely to cut back on driving
                                                                                                                                                                      • Figure 67: Expected and declared changes in mileage driven, by race/Hispanic origin, October 2008
                                                                                                                                                                    • Public transportation viewed more favorably by minorities
                                                                                                                                                                      • Figure 68: Personal behavior, oil dependency/the environment, by race/Hispanic origin, October 2008
                                                                                                                                                                  • Cluster Analysis

                                                                                                                                                                      • Convenience Seekers
                                                                                                                                                                        • Who they are
                                                                                                                                                                          • Opportunity
                                                                                                                                                                            • Efficienados
                                                                                                                                                                              • Who they are
                                                                                                                                                                                • Opportunity
                                                                                                                                                                                  • Idealists
                                                                                                                                                                                    • Who they are
                                                                                                                                                                                      • Opportunity
                                                                                                                                                                                        • Cluster characteristics
                                                                                                                                                                                          • Figure 69: Fuel purchasing clusters, October 2008
                                                                                                                                                                                          • Figure 70: Miles driven per month, by clusters, October 2008
                                                                                                                                                                                          • Figure 71: Trust in information sources I, by clusters, October 2008
                                                                                                                                                                                          • Figure 72: Trust in information sources II, by clusters, October 2008
                                                                                                                                                                                          • Figure 73: Attitudes towards gas station selection, by clusters, October 2008
                                                                                                                                                                                          • Figure 74: Attitudes towards gas consumption, by clusters, October 2008
                                                                                                                                                                                          • Figure 75: Attitudes towards energy public policy, by clusters, October 2008
                                                                                                                                                                                        • Cluster demographics
                                                                                                                                                                                          • Figure 76: Fuel purchasing clusters, by gender, October 2008
                                                                                                                                                                                          • Figure 77: Fuel purchasing clusters, by age group, October 2008
                                                                                                                                                                                          • Figure 78: Fuel purchasing clusters, by household income group, October 2008
                                                                                                                                                                                          • Figure 79: Fuel purchasing clusters, by ethnicity/Hispanic origin, October 2008
                                                                                                                                                                                        • Cluster methodology
                                                                                                                                                                                        • Custom Consumer Groups

                                                                                                                                                                                            • Environmentalists: 27% of the sample online population
                                                                                                                                                                                              • Energy Independents: 33% of the sample online population
                                                                                                                                                                                                • Patriots: 53% of the sample online population
                                                                                                                                                                                                  • Loyalists: 29% of the sample online population
                                                                                                                                                                                                  • Appendix: Who Drives

                                                                                                                                                                                                    • Almost all adults drive
                                                                                                                                                                                                      • Northeasterners somewhat less likely to drive
                                                                                                                                                                                                        • Figure 80: Driven a car in the last 30 days, by age, HH income, race/Hispanic origin and region, October 2008
                                                                                                                                                                                                    • Appendix: Other Useful Consumer Tables

                                                                                                                                                                                                      • Consumers buy leading brands, but four in 10 have bought “other” brands
                                                                                                                                                                                                        • Figure 81: Brand purchase, April 2007-June 2008
                                                                                                                                                                                                      • Gas station selection varies somewhat by region
                                                                                                                                                                                                          • Figure 82: Factors in gas station selection, by region, October 2008
                                                                                                                                                                                                      • Appendix: Trade Associations

                                                                                                                                                                                                        Companies Covered

                                                                                                                                                                                                        • American Honda Motor Co., Inc.
                                                                                                                                                                                                        • American Petroleum Institute (API)
                                                                                                                                                                                                        • Association for Convenience and Petroleum Retailing (NACS)
                                                                                                                                                                                                        • BP p.l.c.
                                                                                                                                                                                                        • Bureau of Economic Analysis
                                                                                                                                                                                                        • ChevronTexaco Corporation
                                                                                                                                                                                                        • CITGO Petroleum Corporation
                                                                                                                                                                                                        • ConocoPhillips
                                                                                                                                                                                                        • Department of Federal Highway Administration (FHWA)
                                                                                                                                                                                                        • Exxon Mobil Corporation
                                                                                                                                                                                                        • Greenfield Online
                                                                                                                                                                                                        • Nissan North America, Inc.
                                                                                                                                                                                                        • Safeway Inc
                                                                                                                                                                                                        • The Bureau of Transportation Statistics
                                                                                                                                                                                                        • The Kroger Co.
                                                                                                                                                                                                        • U.S. Environmental Protection Agency
                                                                                                                                                                                                        • Valero Energy Corporation
                                                                                                                                                                                                        • Volkswagen of America, Inc.
                                                                                                                                                                                                        • Walmart Stores (USA)

                                                                                                                                                                                                        Great Fuel Debate - US - January 2009

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