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The Road Ahead for Light Duty Vehicle Fuel Demand

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  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 EIA’s 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 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

  7. 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.

  11. 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

  13. Recent Trends European Union-15 & U.S. Source: Data Transportation Data Book (ORNL); ACEA (Michael Walsh)

  14. 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

  17. EU-15 Demand Mix Projected to See Declining Gasoline Demand Source: History IEA; Forecast Purvin & Gertz

  18. 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

  20. 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

  21. 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

  22. 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

  23. 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. CAFÉ+Hybrid/Diesel Case Far Exceeds Even Europe’s 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 Can’t 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% LessAdditional 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.