# Presentation: 920056

## Energy Issues and the Impacts on Freight Transportation

- Dr. Mark Rodekohr
- Energy Information Administration
- May 17, 2006

## Presentation Organization

- Short-Term Fuel Price Outlook for Freight Fuels
- Longer Term Outlook for the Freight Sector

## West Texas Intermediate Crude Oil Price(Base Case and 95% Confidence Interval*)

**The confidence intervals show  +/- 2 standard errors based on the properties of the model.  *

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## U.S. Distillate Fuel Prices

**Forecast**

**Cents**
**per **
**gallon**

## Growth in World Consumption & Non-OPEC Production

- **Includes OPEC non-crude production, MMBD= million barrels per day*

## World Oil Surplus Production Capacity

**Forecast**

**Million barrels per day**

## Major Events and World Oil Prices

**1970-2005**

**dollars per barrel**

**Notes:**
The world oil market has experienced wide swings over the past 3 decades, due in part to events like the Oil Embargo, the Iranian Revolution, the Iran-Iraq War, the Iraqi invasion of Kuwait, and the Asian Financial Crisis.
More recent events include unrest in Venezuela, the U.S.-Iraq War, tight markets in the current environment of strong world demand growth, and the devastating hurricanes to hit the Gulf Coast. We expect tight markets to continue due to:
Weak production growth in countries outside of the Organization of Petroleum Exporting Countries (OPEC);
Low worldwide spare production capacity, which is at its lowest level in 3 decades; and
Continued geo-political risks, such as the insurgency in Iraq and potential troubles in Nigeria and Venezuela, which have boosted the level of uncertainty in world oil markets. 

## EIA Has Reassessed Its Long-Term Oil Price Projection

**Major oil producing countries pace investment more consistent with higher oil price path**
**Investment impediments more persistent, even after several years of relatively higher oil prices**
**Cost of doing business increasing**
**Not due to “Peak Oil” considerations, although we are following this issue closely**

**Notes:**
EIA has reassessed the long-term oil price outlook for the AEO2006 reference case.  Our expectations on the upstream investment climate have changed for several reasons.
Major oil producing countries’ pace of investments more consistent with higher oil price path.
Investment impediments more persistent even after several years of relatively higher oil prices:
Access to lower-cost prospects limited (Saudi Arabia, Kuwait, United States)
Lack of clear, consistent rules in operating (Russia, Venezuela, Iran)
Asymmetrical market risks favoring the producer government (Russia, Venezuela, Iran)
Cost of doing business increasing;
Infrastructure cost rising (steel, concrete)
Limited skilled personnel available
Major contractors for mega projects stretched
In the longer term, lack of access leads to movement to higher-cost development prospects (deep water, oil sands)
This does not reflect any change in our view of the physical availability of world oil resources.

## World Oil Price, 1980-2030

**World Oil Price, 1980-2030**
**(2004 dollars per barrel)**

- History

- Projections

*Annual Energy Outlook 2005 and 2006*

**Notes:**
As a result, the AEO2006 reference case includes much higher world oil prices than recent AEOs.  In AEO2006, world crude oil prices, which are now expressed in terms of the average price of imported low-sulfur crude oil to U.S. refiners, are projected to fall from current levels to about $47 per barrel in (2004 dollars) in 2014, then rise to $54 per barrel in 2025 and $57 per barrel in 2030. The projected price in 2025 is about $21 per barrel higher than projected in last year’s reference case. 
In previous AEOs, the world crude oil price was defined on the basis of the average imported refiner acquisition cost of crude oil, or IRAC.  Historically, IRAC price has tended to be a few dollars less then the premium crudes, such as West Texas Intermediate and Brent.  In an effort to provide a crude oil price that is more consistent with those generally reported in the media, AEO2006 uses the average price of imported low-sulfur crude oil to U.S. refiners, which is closer to WTI.
It should be noted that the reference case is only one of many cases considered in the AEO2006.  Energy market projections are subject to considerable uncertainty. Price projections are particularly uncertain, because small shifts in either supply or demand, which are both relatively insensitive to price changes, can necessitate large price movements to restore balance between supply and demand.

## U.S. Petroleum Consumption by Sector, 1970-2030

**(million barrels per day)**

**Industrial**

**Transportation**

**Residential and Commercial**

**Electric Power**

- Projections

- History

*Annual Energy Outlook 2006*

**Notes:**
Total petroleum consumption is projected to grow from 20.8 million barrels per day in 2004 to 26.1 million barrels per day in 2025 in the AEO2006 reference case, 1.9 million barrels per day lower in 2025 than in AEO2005.  
Petroleum demand growth in the AEO2006 reference case is lower in all sectors, due largely to the impact of the much higher oil prices in AEO2006, with most of the decline, almost two-thirds, taking place in the transportation sector.
In 2004 the transportation sector accounted for 66 percent of total demand. The share rises to 72 percent in 2030. Efficiency improvements in light-duty vehicles, trucks, and aircraft cannot offset growth in travel. Transportation demand grows from 13.7 to 19.8 million barrels per day in 2030.
The industrial sector currently accounts for about one-fourth of total demand. Consumption increases from 5.0 to 6.1 million barrels per day by 2030.
Together accounting for about 6 percent of total petroleum consumption, demand for oil in the residential and commercial sectors declines slightly in the forecast due to residential buildings. In the residential sector, distillate fuel for heating is increasingly displaced by electricity, natural gas, and propane.
Only 3 percent of electricity generation uses oil. Consumption in the electric power sector remains relatively flat in the forecast at about 0.5 million barrels per day.

## U.S. Transportation Energy Consumption by Mode, 1980-2030

**(quadrillion Btu)**

- Projections

- History

*Annual Energy Outlook 2006*

**Light-Duty Vehicles**

**Rail**

**Freight Trucks**

**Water**

**Air**

**Bus**

**Notes:**
Light-duty vehicle energy demand accounts for 62 percent of total transportation energy demand and increases from 16.8 quadrillion Btu in 2004 to 23.8 quadrillion Btu in 2030, which represents a 1.4-percent annual growth rate.
Energy demand from heavy trucks increases at the most rapid rate over the projection period at 1.9 percent annually and accounts for 20 percent of total transportation energy demand.
Heavy vehicle energy demand increases from 5.1 quadrillion Btu in 2004 to 7.9 quadrillion Btu in 2030, of which 7.6 quadrillion Btu is for heavy trucks and 0.3 quadrillion Btu for buses.
Energy demand from air travel increases from 3.4 quadrillion Btu in 2004 to 4.8 quadrillion Btu in 2030, an annual increase of 1.5 percent. 
Energy demand from rail and waterborne travel combined account for 5 percent of total transportation energy demand and increases from 1.7 quadrillion to 2.1 quadrillion Btu.

## U.S. Heavy-Duty Vehicle Energy Consumption, 1980-2030

**(quadrillion Btu)**

- Projections

- History

*Annual Energy Outlook 2005 and 2006*

**AEO2006**

**AEO2005**

**Notes:**
In AEO2006, energy consumption by heavy-duty vehicles is expected to increase from 5.1 quadrillion Btu in 2004 to 7.9 in 2030, an average annual growth of 1.7 percent.
For freight trucks alone, it is a growth from 4.7 to 7.6 quadrillion Btu, a rate of 1.9 percent.
Consumption is only marginally lower than in the AEO2005 for 2025, 7.2 versus 7.3 quadrillion Btu.

## U.S. Heavy-Duty Travel, 1980-2030

**(billion miles)**

- Projections

- History

*Annual Energy Outlook 2005 and 2006*

**AEO2006**

**AEO2005**

**Notes:**
Historically, freight truck travel has grown by about 3.0 annually.
In AEO2006, its growth averages 2.3 per year through 2030, increasing from 226 to 413 billion miles in 2030.
Unlike light-duty travel, heavy-duty travel is not strongly affected by higher fuel prices. In 2025, heavy-duty vehicle travel is only 6 billion miles less, or 2 percent lower, than the 373 billion miles in AEO2005.
Output grows in many manufacturing sectors, most of the future increase in demand for freight movement of goods in related to output growth from the electronics, food, plastics, furniture, and miscellaneous manufacturing sectors.
Travel for freight trucks is similar to aircraft travel in that it is only marginally affected by the higher fuel prices. Compared to last year’s projection, air travel is only slightly reduced. However, By 2025, average aircraft efficiency increases to 72.4 seat miles per gallon in the AEO2006 compared to 68.5 in the AEO2005, an improvement of 5.7 percent. Efficiency continues to improve and reaches 76 seat miles per gallon by 2030 in the AEO2006.  There is also a significant increase in aircraft load factors. New data indicate a significant increase in average aircraft load factors between 2002 and 2004, to 0.73 and by 2025 is projected to increase to 0.76 in the AEO2006 compared to 0.72 in the AEO2005, increasing further to 0.81 in 2030.  

## U.S. Heavy-Duty Vehicle Efficiency, 1980-2030

**(miles per gallon)**

- Projections

- History

*Annual Energy Outlook 2005 and 2006*

**AEO2006**

**AEO2005**

**Notes:**
Average heavy truck fuel economy improved from 5.5 mpg in 1980  to 6.4 mpg in 1997 and decreased to 5.8 mpg in 2001 as heavier trucks accounted for a larger percentage of total heavy truck travel.
Due to technologies associated with emission control compliance average fuel economy is projected to be relatively flat through 2013 and increase after that to 6.8 miles per gallon in 2030 as newer technologies that offset this trend will take over.
Average NEW VEHICLE fuel economy is expected to increase to 7 mpg in 2030 from 6 mpg in 2005
Advanced technologies will contribute to the improvement in fuel economy with the new vehicles.
It is projected that heavy trucks (class 7-8) as a percent of total travel will continue to grow over the forecast period increasing from 53% to 57% which takes us to the next slide that shows sales of heavy duty trucks...

## U.S. Heavy-Duty Vehicle Sales, 1980-2030

**(thousands)**

- Projections

- History

*Annual Energy Outlook 2005 and 2006*

**AEO2006**

**AEO2005**

**Notes:**
The data presented here is for heavy duty vehicle sales (all classes) and it shows an increase from 2.2 million in 1980 to 9.04 million in 2002.
It is projected that the sales of all classes of heavy duty vehicles will grow to 12.4 million in 2030.
Class 7-8 type trucks decreased from 78% share of heavy trucks (class 3-8) in 1980 to 53% share in 2002.
Faster growth in AEO2006 compared to AEO 2005 comes from the projected increase in economic growth

## U.S. Heavy-Duty Vehicle Technology Penetration, 2000-2030

**(percent)**

*Annual Energy Outlook 2006*

**Internal Friction Reduction**

**Advanced Drag Reduction**

**Advanced Fuel Injection**

**Notes:**
PLEASE INSERT THE NEW GRAPH HERE!!!
This slide shows the market penetration of new technologies in the heavy duty (Class 7-8) trucks.
Advances in fuel injection technologies will help in the improvement in fuel economy.
Drag reduction comes from aerodynamic improvements and also through pneumatic lift.
Friction reduction is expected from improved bearings and coatings that reduce resistance between moving parts.
Gains made from these technologies are offset to some extent with the NOx emission control technologies that have to be implemented in vehicles in this class by law.
Fuel economy penalty of up to 3% is expected from implementation of the NOx adsorber system alone. 

## U.S. Transportation Fuel Use in Two Technology Cases

**U.S. Transportation Fuel Use in Two Technology Cases**
**(percent change from reference case)**

**2005 Technology**

**High Technology**

**Light-Duty**
**Vehicles**

**Freight**
**Trucks**

**Aircraft**

**Light-Duty**
**Vehicles**

**Freight**
**Trucks**

**Aircraft**

**2010**

**2030**

*Annual Energy Outlook 2006*

**Notes:**
In the reference case, delivered energy use in the transportation sector increases from 27.8 quadrillion Btu in 2004 to 39.7 quadrillion Btu in 2030.
In the high technology case, the projection for 2030 is 2.8 quadrillion Btu (7.1 percent) lower, with about 54 percent (1.5 quadrillion Btu) of the difference attributed to efficiency improvements in light-duty vehicles as a result of increased penetration of advanced technologies, including variable valve lift, electrically driven power steering pumps, and advanced electronic transmission controls.
Similarly, projected fuel use by heavy freight trucks in 2030 is 0.1 quadrillion Btu (0.9 percent) lower in the high technology case than in the reference case, and advanced aircraft technologies reduce fuel use for air travel by 1.0 quadrillion Btu (23.7 percent) in 2030.
In the 2005 technology case, with new technology efficiencies fixed at 2005 levels, efficiency improvements can result only from stock turnover. As a result, total delivered energy demand for transportation in 2030 is 3.7 quadrillion Btu (9.2 percent) higher in 2030 in the 2005 technology case than in the reference case. Fuel use for air travel in 2030 is 1.0 quadrillion Btu (23.4 percent) higher in the 2005 technology case than in the reference case, and freight trucks use 0.9 quadrillion Btu (11.9 percent) more fuel in 2030.

## World Transportation Sector Energy Use by Region, 2002-2025 (quadrillion Btu)

*International Energy Outlook 2005*

**Notes:**
Energy use for the transportation sector is expected to have the strongest growth in the emerging economies, especially emerging Asia.
In general, the transportation sector of the mature market economies is fully established, with extensive infrastructure that includes highways, airport facilities, and rail systems.  Energy demand for transportation in the mature market economies is expected to grow at an average annual rate of 1.2 percent between 2002 and 2025.
Energy demand in the transitional EE/FSU economies is expected to grow by 1.6 percent per year over the projection period.  The growth in transportation energy use in this region is expected to be led by expanding ownership of private automobiles and an increasing role of trucking in freight transportation.
For the emerging economies, transportation energy use is expected to increase by 3.6 percent per year between 2002 and 2025.  The countries of this region are expected to account for an increasing share of the world’s energy use in the transportation sector. In 2002, emerging economies accounted for about 31 percent of world energy use for transportation. In 2025, this share increases to 43 percent, as the gap between emerging economies and the mature market economies narrows substantially over the forecast.
Similar to the United States, but not quite as strongly, worldwide growth in oil demand is largely due to growth in transportation demand. In 2025, 60 percent of oil in expected to be used for transportation.

## World Oil Reserves by Country, as of January 1, 2006(billion barrels)

*Oil & Gas Journal*, Vol. 103, No. 47 (December 19, 2005).

**World Total =**
**1,293 Billion Barrels**

**Notes:**
Oil resources are adequate to meet growing oil demand to 2025. 
OPEC accounts for 70 percent of the world’s proved oil reserves, and 8 of the 10 countries with the largest proved reserves are OPEC members and alone account for 67 percent of the world’s oil reserves.
According to the Oil & Gas Journal, in January 2006, OPEC accounted for 902 billion barrels of the 1,293 billion barrels of the world’s proven oil reserves.