$14/Gallon and Walmart is just fine!
In his new book $20 a Gallon Christopher Steiner pegged $14/gallon as the dead of Wal-Mart. So is this claim true? To find out we need to figure out two items: The impact of the price of fuel (Diesel for Walmart’s trucks and Gasoline for consumers) and put it in context of the sales of goods at Walmart.
How much fuel does Walmart Use?
Walmart owns the largest private truck fleet in the world to transport goods to their stores. Unfortunately Walmart does not directly publish the fuel usage statistics, but thankfully their 2009 Sustainability Report provides enough numbers to figure out the details for the US fleet.
[For 2008] driving 7 percent, or about 90 million, fewer miles in absolute terms…By driving fewer miles, we avoided adding 200,000 metric tons of CO2 into the atmosphere.
Thanks to figuring 22.2 lbs CO2/gal of diesel and some algebra we can figure the fuel use for Walmart in 2008:
| Miles Driven | 1,290,414,675 Miles |
| Average MPG | 4.53 MPG |
| Total Fuel Consumed in 2008 | 284,859,752 Gallons |
At first glance, using 285 million gallons of fuel at $14 per gallon will devastate Walmart. But let’s put that in context: Walmart’s US sales for FY2009 is $255.7 Billion Dollars (2009 Annual Report). So at $14 a gallon, Walmart’s fuel cost would constitute 1.5% of total sales, meaning that it would be a literal blip on the radar.
How much do consumers burn to get to Walmart?
This question is a lot more complex.
- A study by Thomas J. Holmes for the Federal Reserve Bank of Minneapolis noted that that median distance to a Walmart in the US is 4.2 miles.
- The Bureau of Transportation Statistics noted the average fuel efficiency of a car in 2006 is 22.4 MPG
- Walmart in a Press Release noted that 138 million people visit Walmart every week.
Unfortunately, there is no data that I could find that shows how many people visit Walmart per car trip to Walmart, but for the sake of this analysis, let’s assume that on average 2 people visit Walmart per car trip.
So with 138 million people visiting Walmart, that means 3.5 billion car trips are taken annually to Walmart. Considering the annual sales of $255.7 Billion, that means the average car trip to Walmart involves spending $71.27.
| Annual Car Trips to Walmart | 3,588,000,000 Trips |
| Annual Miles Traveled (R/T) | 30,139,200,000 Miles |
| Gallons of Fuel Consumed | 1,345,500,000 Gallons |
| Gallons of Fuel Per Trip | 0.375 Gallon |
| Average Purchase Per Trip | $71.27 |
| At $14/Gallon, Cost to Visit Walmart | $5.25 |
So with fuel at $14/Gallon, the cost of a round trip to Walmart will constitute 7% of the total amount spent during a visit.
The Bottom Line
At $14 a Gallon, Walmart will spend $4 Billion supplying their stores and consumers will spend $18 Billion to shop at Walmart for a total of $22 Billion. That means that the cost of shopping at Walmart will increase by 9%. Now given, this does not take into account the impact of higher oil prices on the cost of producing the products and supplier shipping including transpacific shipping-which might mean more production moves domestically; but this exercise shows that if fuel prices were to reach $14 a gallon, the impact on the average Walmart shopper will be painful but manageable.