The Road Ahead for Light Duty The Road Ahead for Light Duty Vehicle Fuel DemandVehicle Fuel Demand

Joanne Shore

Energy Information Administration

July 7, 2005

Refining Capacity Surplus Shrank As Refining Capacity Surplus Shrank As Demand Grew, Creating Future ChallengesDemand Grew, Creating Future Challenges

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101214161820

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U.S. Refining Capacity & Inputs

Gross Inputs

Operable Capacity

Source: EIA

Demand – A Crucial Factor Affecting Demand – A Crucial Factor Affecting Capacity DecisionsCapacity Decisions

• Transportation is major growth sector

• What could affect future growth?

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Transportation

Total End Use

U.S.Petroleum Consumption

Source: EIA

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

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2005 2010 2015 2020

LDV Demand Total Transportation

Increases in U.S. Petroleum Use for Transportation

Total Transportation Demand14.4 MMB/D in 2005

Source: EIA, Annual Energy Outlook 2005

Presentation OverviewPresentation 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

Factors Affecting Light Duty Vehicle Factors Affecting Light Duty Vehicle (LDV) Petroleum Fuel Consumption(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

VMT: More Vehicles Per Driver and VMT: More Vehicles Per Driver and More Miles Per DriverMore Miles Per Driver

Individual Driver Information

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30

35

1969 1977 1983 1990 1995 2001

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0.8

1.0

1.2

1.4

Veh

icle

s p

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rive

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Daily VMT per Driver Vehicles per DriverNote: VMT – Vehicle miles traveled.

Source: Summary of Travel Trends, 2001 National Household Travel Survey, ORNL

Vehicles per Driver

MPG: Efficiency Improvements MPG: Efficiency Improvements Leveled OffLeveled Off

10

15

20

25

30

35

40

1970 1980 1990 2000 2010

Fu

el E

con

om

y (M

iles

Per

Gal

lon

) CAFE Estimates (Adjusted EPA)

Cars

Total LDV

Trucks

Fleet

Weight

4060 lbs

Fleet

Weight

3271 lbs

Fleet

Weight

3612lbs

Note: LDV weights are for 1975, 1985, 1995, 2004

Source: U.S EPA, Light-Duty Automotive and Fuel Economy Trends: 1975-2004, April 2004.

Fleet

Weight

4066 lbs

MPG: Historical Efficiencies Affected MPG: Historical Efficiencies Affected Demand Relatively QuicklyDemand Relatively Quickly

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20,000

30,000

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90,000

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ile

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Light Duty Vehicle Fuel Use & Miles Traveled 1978-1987

Light Duty Trucks

Cars

Miles TraveledTotal Fuel Use

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

MPG: LDV Performance & Weight MPG: LDV Performance & Weight Countered EfficiencyCountered Efficiency

3000

3500

4000

4500

1975 1980 1985 1990 1995 2000 2005

9

10

11

12

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14

15Weight (LBS) 0-60 Time (Sec)

0-60 Time (Sec)

Weight (LBS)

Source: U.S EPA, Light-Duty Automotive and Fuel Economy Trends: 1975-2004, April 2004.

MPG: Growing LDV Truck Share of MPG: Growing LDV Truck Share of Sales Hindered Fleet EfficiencySales Hindered Fleet Efficiency

20%

53%

0%

20%

40%

60%

80%

100%

1976 1980 1985 1990 1995 2000 2003

U.S. Car & Light Truck Sales Shares

Cars Light trucks

Source: Oak Ridge National Laboratory, Light Vehicle MPG and Market Shares System, Oak Ridge, TN, 2004, Wards AutoInfoBank

Jan-May Ward’s Sales

2004 2005

Cars 45.5% 46.2%

Light Trucks

54.5% 53.8%

Hybrid Vehicle Sales Picking UpHybrid 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

Recent Trends Recent Trends European Union-15 & U.S.European Union-15 & U.S.

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4519

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1996

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EU-15 LDDiesel

EU-15 LDV

EU-15Gasoline

US Cars

US LDV

US LD Trucks

Light Duty Vehicle New Sales Efficiencies

Source: Data Transportation Data Book (ORNL); ACEA (Michael Walsh)

European ModelEuropean 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

Diesel PM and NOx Standards Diesel PM and NOx Standards Higher in U.S. than EuropeHigher in U.S. than Europe

Diesel PM and Nox Standards

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PM (g/km)

NO

x (g

/km

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U.S. Pre 2004

U.S. Today

EU-5?2010

EU 3Pre 2000

EU 4Today

JapanToday

Source: Michael Walsh, Motor Vehicle Pollution Controls, European Conference of Ministers of Transport, January 2000

European Preference for Diesel Grew European Preference for Diesel Grew Quickly since Late 1990s Quickly since Late 1990s

43.7

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ew

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istr

atio

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1990 1992 1994 1996 1998 2000 2002

W. Europe Diesel-Fueled Vehicle Share of New Passenger Car Registrations

Source: ACEA www.acea.be

EU-15 Demand Mix Projected to See EU-15 Demand Mix Projected to See Declining Gasoline DemandDeclining Gasoline Demand

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150

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990

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Mill

ion

To

nn

es/

Ye

ar Diesel Fuel

Gasoline

EU-15 Demand Mix

Source: History IEA; Forecast Purvin & Gertz

Factors Affecting LDV Efficiency (2003)Factors Affecting LDV Efficiency (2003)

44%

GasolineDiesel

2%

11%53%

EU U.S.

Diesel Share of

New Sales

LD Truck Share of

New Sales

Source: ACEA, ORNL Transportation Data Book, CCFA

U.S. & EU Trends Affecting EfficiencyU.S. & EU Trends Affecting Efficiency

Values in 2002Percent Change

1995-2002

EU-15 U.S. EU-15 U.S.

Population (Millions)

380.4 288.4 2.0% 8.3%

LDVs per

1000 Population488 766 14.8% 5.5%

Vehicle Weight (pounds)

2,677 3,951 10.3% 9.4%

Fuel Economy (MPG)

35.6 24.7 15.2% -0.8%

Sources: ACEA, ORNL Transportation Data Book, EPA Automotive and Fuel Technology Trends 75-04, Michael Walsh

Factors Improving EfficiencyFactors 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

Factors Decreasing EfficiencyFactors 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

EU Lessons? 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

U.S. Future: Three CasesU.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

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

Reference Case LD Vehicle Efficiency

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22.3

18.517.2

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Mile

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0%

12%

24%

36%

48%

60%Percent TruckSales

Average CarMPG

Average TruckMPG

Average LDVMPG

Source: EIA, Annual Energy Outlook 2005

New Vehicle MPG ProfilesNew Vehicle MPG Profiles

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EP

A M

iles

Per

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Reference

CAFÉ

CAFÉ+Hybrid/Diesel

New Car Efficencies

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2005 2010 2015 2020

EP

A M

iles

Per

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Reference

CAFÉ

CAFÉ+Hybrid/Diesel

New Light Duty Trucks Efficencies

Source: EIA

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

Hybrid and Diesel Share of New LDV Sales

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2005 2010 2015 2020

Pe

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Reference Case

CAFE Case

CAFÉ+Hybrid/Diesel

Source: EIA

MPG: New Cars Represent 7.5%-8.0% of MPG: New Cars Represent 7.5%-8.0% of Total Stock Each Year, But Are Driven Total Stock Each Year, But Are Driven

Slightly More Than Older CarsSlightly More Than Older Cars

Fleet Age and Use Distribution

Vehicle Age Fleet SharePercent Miles

Driven

0-2 yrs 15% 21%

3-5 yrs 22% 25%

6-10 yrs 28% 29%

11 or more 35% 25%

Source: Summary of Travel Trends, 2001 National Household Travel Survey, ORNL

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

CAFÉ + Hybrid/Diesel Efficiency Effect

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New Cars

Total LDV Stock

New Trucks

Source: EIA

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

LD Vehicle Miles Traveled

0500

100015002000250030003500400045005000

2005 2020 2020 CAFE

Bill

ion

Mile

s

Increase inMilesTraveled/DriverEffect

Increase inDrivingPopulationEffect

VMT in 2005

31.5 Miles Per Day Per

Driver

37.9 Miles Per Day Per Driver 39.1

Source: EIA

By 2020, CAFE Case Requires 40% By 2020, CAFE Case Requires 40% LessLess AdditionalAdditional Supply Than Reference Supply Than Reference

Increase in Light Duty Vehicle Fuel Use

6.0

7.0

8.0

9.0

10.0

11.0

12.0

2005 2010 2015 2020

Mil

lio

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CAFÉ+Hybrid/Diesel

2.9 MMB/D

1.7

0.8

2005-2020

Source: EIA

Implications for Refinery InvestmentsImplications 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.