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The Road Ahead for Light Duty Vehicle Fuel Demand Joanne Shore Energy Information Administration July 7, 2005 Refining Capacity Surplus Shrank As Demand Grew, Creating Future Challenges Operable Capacity Gross Inputs Source: EIA Demand – A Crucial Factor Affecting Capacity Decisions

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The Road Ahead for Light Duty Vehicle Fuel Demand

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The road ahead for light duty vehicle fuel demand l.jpg

The Road Ahead for Light Duty Vehicle Fuel Demand

Joanne Shore

Energy Information Administration

July 7, 2005


Refining capacity surplus shrank as demand grew creating future challenges l.jpg

Refining Capacity Surplus Shrank As Demand Grew, Creating Future Challenges

Operable Capacity

Gross Inputs

Source: EIA


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Demand – A Crucial Factor Affecting Capacity Decisions

  • Transportation is major growth sector

  • What could affect future growth?

Source: EIA


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Future: U.S. Transportation Demand Growth Drives EIA’s Reference Case

Source: EIA, Annual Energy Outlook 2005


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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


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Factors Affecting Light Duty Vehicle (LDV) Petroleum Fuel Consumption

Miles Traveled

Efficiency (MPG)

  • 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


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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.


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MPG: Historical Efficiencies Affected Demand Relatively Quickly

Source: Department of Transportation, FHA, Highway Statistics 2001, Table VM-1.


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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


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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


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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


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European Preference for Diesel Grew Quickly since Late 1990s

Source: ACEA www.acea.be


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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


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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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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

Factors Improving Efficiency


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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

Factors Decreasing Efficiency


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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

    • Europe’s 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


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Reference Case: Future MPG Improvements Hindered by Continuing Shift Towards Trucks

Source: EIA, Annual Energy Outlook 2005


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New Vehicle MPG Profiles

Source: EIA


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CAFÉ+Hybrid/Diesel Case Far Exceeds Even Europe’s High Diesel Penetration Rates

Source: EIA


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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


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Even Fast Penetration of High Efficiency Vehicles Can’t Change Total Stock Quickly

Source: EIA


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Lower Costs May Result in More Miles Driven (3% Rebound Effect)

Source: EIA


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By 2020, CAFE Case Requires 40% LessAdditional Supply Than Reference

2005-2020

2.9 MMB/D

1.7

0.8

Source: EIA


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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.


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