The Road Ahead for Light Duty Vehicle Fuel Demand

1
The Road Ahead for Light Duty Vehicle Fuel Demand

• Joanne Shore
• Energy Information Administration
• July 7, 2005

2
Refining Capacity Surplus Shrank As Demand Grew,
Creating Future Challenges
Operable Capacity
Gross Inputs
Source EIA
3
Demand A Crucial Factor Affecting Capacity
Decisions

• Transportation is major growth sector
• What could affect future growth?

Source EIA
4
Future U.S. Transportation Demand Growth Drives
EIAs Reference Case
Source EIA, Annual Energy Outlook 2005
5
Presentation Overview

• U.S. history and factors affecting light duty
  vehicle fuel demand
• European experience Can diesel-fueled vehicles
  play a similar role in the U.S.?
• U.S. future Reference Case variations
• Modest changes in vehicle technology can slow
  demand growth significantly but not quickly
• Hybrids and diesel vehicles can add to this
  impact
• But stopping demand growth is unlikely
• Policy changes are needed to slow growth

6
Factors Affecting Light Duty Vehicle (LDV)
Petroleum Fuel Consumption
Efficiency (MPG)
Miles Traveled

• Driving population
• Miles driven per driver
• Personal Income
• Cost to drive
• Other (Age, sex, etc.)

• Technology
• Power Train
• Hybrids
• Diesel
• Vehicle Mix (Cars v trucks)

Alternative Fuels

• Hydrogen, All Electric, All Ethanol, Natural Gas

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VMT More Vehicles Per Driver and More Miles Per
Driver
Vehicles per Driver
Note VMT Vehicle miles traveled. Source
Summary of Travel Trends, 2001 National
Household Travel Survey, ORNL
8
MPG Efficiency Improvements Leveled Off
Fleet Weight 4060 lbs
Fleet Weight 3271 lbs
Fleet Weight 3612lbs
Fleet Weight 4066 lbs
Note LDV weights are for 1975, 1985, 1995,
2004 Source U.S EPA, Light-Duty Automotive and
Fuel Economy Trends 1975-2004, April 2004.
9
MPG Historical Efficiencies Affected Demand
Relatively Quickly
Source Department of Transportation, FHA,
Highway Statistics 2001, Table VM-1.
10
MPG LDV Performance Weight Countered Efficiency
Source U.S EPA, Light-Duty Automotive and Fuel
Economy Trends 1975-2004, April 2004.
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MPG Growing LDV Truck Share of Sales Hindered
Fleet Efficiency
Source Oak Ridge National Laboratory, Light
Vehicle MPG and Market Shares System, Oak Ridge,
TN, 2004, Wards AutoInfoBank
12
Hybrid Vehicle Sales Picking Up

• Toyota Prius
• 2002 sales 20,119
• 2003 sales 24,627
• 2004 sales 53,991
• 2005 projected sales 100,000
• Toyota introducing Hybrid Lexus RX and Highlander

Source Automotive News Market Data Book 2004,
2005
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Recent Trends European Union-15 U.S.
Source Data Transportation Data Book (ORNL)
ACEA (Michael Walsh)
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European Model

• Goal to reduce demand, carbon dioxide emissions
  (greenhouse gas) concerns
• Increased diesel preference over gasoline
• Fuel savings while preserving performance (35
  more efficient than gasoline vehicles)
• New LDV diesel penetration more than doubled in 6
  years 22 in 1997 to 44 in 2003
• Tax incentives plus targets
• High fuel taxes and taxes favoring diesel
• Purchase incentives for more efficient vehicles
• Economics favor technology improvements
• Voluntary industry CAFÉ standards

15
Diesel PM and NOx Standards Higher in U.S. than
Europe
Source Michael Walsh, Motor Vehicle Pollution
Controls, European Conference of Ministers of
Transport, January 2000
16
European Preference for Diesel Grew Quickly since
Late 1990s
Source ACEA www.acea.be
17
EU-15 Demand Mix Projected to See Declining
Gasoline Demand
Source History IEA Forecast Purvin Gertz
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Factors Affecting LDV Efficiency (2003)
EU
U.S.
Diesel Share of New Sales
LD Truck Share of New Sales
Source ACEA, ORNL Transportation Data Book, CCFA
19
U.S. EU Trends Affecting Efficiency
Sources ACEA, ORNL Transportation Data Book, EPA
Automotive and Fuel Technology Trends 75-04,
Michael Walsh
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Factors Improving Efficiency

• Europe (EU-15)
• Diesel vehicle share growth
• Commitment to CO2 reduction
• Voluntary CAFE by manufacturers
• High fuel taxes, but lower taxes for diesel
• Technology improvements both diesel and gasoline
• Less stringent PM NOx standards

• U.S.
• Small increase in light truck CAFE
• Recent fuel cost increases
• Technology improvements in gasoline vehicles
• Hybrid interest

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Factors Decreasing Efficiency

• Europe
• Increasing vehicle size and performance
• Increase in cost for efficiency improvements

• U.S.
• Increase in vehicle performance and size
• Increased share of LD trucks
• Low fuel tax and few efficient vehicle purchase
  incentives
• Manufacturers opposition to CAFE
• Small LD diesel market, strict NOx and PM

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EU Lessons?

• Diesel may play larger role in the U.S. future
• Environmental emissions being overcome
• Consumer issues overcome in Europe, and could
  become a positive relative to gasoline
• But fuel cost advantage may diminish
• Basic population growth and car-dependency issues
  will make slowing U.S. demand a larger challenge
  than in EU.
• U.S. would need to improve efficiency on large
  fraction of new vehicles to see impact
• Europes diesel momentum in 1995 helped produce a
  15 improvement in MPG in 7 years
• Would unlikely be achievable in the US during
  next 7 years

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U.S. Future Three Cases

• Reference Case Continuing trends
• CAFÉ Evolutionary (not revolutionary) changes
• Technology changes
• Affects all vehicles in small ways
• CAFÉ Hybrid/Diesel Extreme case
• Early, high penetration of hybrid and diesel
  vehicles
• Affects small number of vehicles in large way
• Illustrates practical limits to impacts on demand

24
Reference Case Future MPG Improvements Hindered
by Continuing Shift Towards Trucks
Source EIA, Annual Energy Outlook 2005
25
New Vehicle MPG Profiles
Source EIA
26
CAFÉHybrid/Diesel Case Far Exceeds Even Europes
High Diesel Penetration Rates
Source EIA
27
MPG New Cars Represent 7.5-8.0 of Total Stock
Each Year, But Are Driven Slightly More Than
Older Cars
Source Summary of Travel Trends, 2001 National
Household Travel Survey, ORNL
28
Even Fast Penetration of High Efficiency Vehicles
Cant Change Total Stock Quickly
Source EIA
29
Lower Costs May Result in More Miles Driven (3
Rebound Effect)
Source EIA
30
By 2020, CAFE Case Requires 40 Less Additional
Supply Than Reference
2005-2020
2.9 MMB/D
1.7
0.8
Source EIA
31
Implications for Refinery Investments

• It takes 10 years to begin to see effects of
  significant vehicle efficiency changes.
• Without much hybrid or diesel penetration, within
  15 years, technology could reduce need for new
  capacity by 30-40.
• With increased hybrid and diesel penetration,
  demand growth could be further slowed.
• But stopping demand growth soon requires unlikely
  to impossible vehicle/fuel changes.
• Furthermore, policy changes likely would be
  required to achieve even the modest CAFÉ Case.