Gas Stations in Crisis: Electric Vehicle Boom Spells Doom for Thousands

Starting a gas station business was once considered a highly profitable venture. However, this sector is now facing a crisis. Financial difficulties have forced many gas stations out of business, leading to a new set of problems.

Starting a gas station business requires a high initial cost and stringent conditions, creating a high barrier to entry. According to the industry, the land cost is separate; construction costs are $226,000, and building construction costs are $113,000, totaling at least $339,000.

However, it was a business that guaranteed high profits. As the distribution of cars dramatically increased, the demand for gas also surged, allowing businesses to make a lot of money.

Since surpassing 12,000 locations in 2007, the number increased to 13,004 in 2010.

However, the business has declined due to the growing demand for electric, hydrogen, and hybrid vehicles and fierce competition from budget gas stations offering cheap fuel.

According to data from the Korea National Oil Corporation and the Korea Petroleum Management Institute, more than 500 gas stations have closed each year from 2019 to 2022.

Last year, the number of gas stations nationwide was 11,023, the lowest in 20 years since gas station status surveys started in 2003 when there were 18,490 stations.

The gas station industry is grappling with the issue of numerous facilities being abandoned due to the high costs of closure. These deserted stations often feature rusted pumps shrouded in dust, tumbled-down signage, and scattered miscellaneous items left in the open where fuel was once dispensed. One particularly stark example is a station along a national highway, left wide open with heaps of broken concrete and no safety measures in place, earning it the moniker “zombie gas station.”

The abandoned stations pose significant environmental risks. Fuel storage tanks left underground can contaminate soil if oil seeps out and infiltrates the groundwater, potentially tainting the drinking water supply. The danger of explosions is also due to negligence in managing these defunct sites.

Under the Soil Environment Conservation Act, gas stations must remediate the soil and ensure it is contaminant-free before they can officially close. However, the costs for demolition and soil purification are steep, amounting to $56,600 each, or a total of $113,200, which deters many owners from shutting down their operations.

Experts argue these closed gas stations should be converted into logistics warehouses or distribution hubs, but closure costs are a hurdle.

Some are calling for government support to close gas stations properly. However, establishing a mutual aid association to carry out support projects has not been realized, and a bill to support gas station closures is pending in the National Assembly, but its passage is uncertain.

Meanwhile, the number of these zombie gas stations is expected to increase.

The Korea Energy Economics Institute recently predicted that with the increase in electric and hydrogen vehicles, about 8,000 gas stations nationwide will be phased out by 2040.

According to a report by the Korea Labor Institute, fuel retail businesses such as gas stations and LPG charging stations will decrease from 228 in 2022 to 199 in 2030, a reduction of about 87%.