Onyx P&G Consulting Reviews the Global Energy Outlook through 2040 – Part 3

This month we continue with our series where we broaden our scope to review the global energy outlook from 2010 – 2040. This long term outlook of how global dynamics will change the face of energy for the United States all countries as emerging nations are consuming increasing amounts of energy.

What do we see over the next 30 years? The answer to that question varies by region, reflecting diverse economic and demographic trends as well as the evolution of technology and government policies.  This blog will deal with how the transportation sector will impact the global economy.

Commercial Transportation Demand Rises as the Global Economy Continues to Expand

One of the most profound shifts in energy usage through 2040 will come from the transportation sector. The proliferation of hybrid and other advanced vehicles – along with improvements to conventional-vehicle efficiency – will result in flattening demand for personal transportation, even as the number of personal vehicles in the world doubles. In contrast, demand for fuel for commercial transportation – trucks, airplanes, trains and ships – will continue to rise sharply.

As personal vehicles grow more fuel-efficient, growth in global transportation demand will be led by trucks, ships and planes.

Over the next 30 years, it is expected for hybrid vehicles to move from the margins to the mainstream. As a result, energy trends in the transportation sector will diverge in an unprecedented way, with demand for personal transportation fuels changing very little even as commercial transportation energy needs continue to rise sharply.

Personal or light duty, vehicles are the cars, SUVs and light pickup trucks that people drive in their everyday lives. From now through 2040, the number of personal vehicles in the world – what we call “the global fleet” – will nearly double, to 1.6 billion vehicles. Not surprisingly, the vast majority of this growth will come from the Non OECD, where prosperity is growing rapidly and vehicle ownership levels today are relatively low.

And yet global demand for fuel for personal vehicles will soon peak and then begin to decline. The reason is an expected steep increase in average vehicle fuel economy. Largely because of tightening government standards, it is expected that by 2040, hybrids and other advanced vehicles will account for nearly 50 percent of all light duty vehicles on the road, compared to only about 1 percent today

 

On the other hand, demand for commercial transportation – mostly trucks, but also airplanes, ships and trains – is expected to rise in all regions of the world, even with significant gains in efficiency. Overall, global energy demand for transportation will rise by nearly 45 percent from 2010 to 2040.

Global commercial freight movements have doubled since 1980, to more than 40 trillion ton-miles per year.[i] Most of this freight is moved by ships.

Global economic activity, led by the Non OECD, outpaces gains in commercial-vehicle efficiency

Global economic growth will drive a steep increase in demand for energy for commercial transportation, as business activity and rising incomes enable increased movement of goods – both within and between nations. From 2010 to 2040, demand for energy for commercial transportation will rise by more than 70 percent. Most of this growth will come from heavy duty vehicles, which include freight trucks of all sizes, as well as buses, emergency vehicles and work trucks.

It is expected that heavy duty vehicles will grow significantly more fuel-efficient over the next 30 years. However, these improvements will be partially offset by operating factors such as increased road congestion and evolving delivery trends. As a result, by 2030, the world will use more fuel for trucks and other heavy duty vehicles than for all personal vehicles combined. By 2040, heavy duty fuel demand will be up about 60 percent versus 2010.

This shift will be reflected in the market for transportation fuels. Demand for diesel – the most popular fuel for heavy duty vehicles – will rise by 85 percent through 2040, while gasoline demand will fall by about 10 percent.

Growth in commercial transportation is not limited to vehicles on the road. Together, demand for aviation and marine fuels will almost double over the next 30 years.

While demand for energy for commercial transportation will rise in all parts of the world through 2040, growth will be steepest in Non OECD countries, whose economies are expanding at a faster rate than the more mature economies of the OECD. About 80 percent of the growth in commercial transport demand will come from developing nations.

 

Personal Vehicles will become Far More Fuel-Efficient by 2040

Growing use of hybrid vehicles will help countries meet fuel-economy goals.

The cars on the world’s roads in 2040 will be a very different mix than what we have today. To a large extent, these changes will be driven by government policies that will mandate the fuel economy of personal vehicles.

Conventional gasoline- and diesel-powered vehicles will become much more efficient over the coming decades. However, these gains will not be enough on their own to meet government targets. As a result, conventional vehicles, which today are about 98 percent of the global fleet, will drop to about 50 percent of the fleet and only 35 percent of new-car sales by 2040.

On the other hand, it is expected that by 2040, hybrids and other advanced vehicles will account for nearly 50 percent of light duty vehicles on the road, compared to only about 1 percent today. The vast majority will be hybrids that use mainly gasoline plus a small amount of battery power; these will make up more than 40 percent of the global fleet by 2040. Globally, it is expected that growth in plug-in hybrids and electric vehicles, along with compressed natural gas (CNG) and liquefied petroleum gas (LPG) powered vehicles. However, these will account for only about 5 percent of the global fleet in 2040, their growth limited by cost and functionality considerations.

Additionally, to achieve proposed fuel-economy targets, personal vehicles will need to be smaller and lighter than they are today. Vehicle downsizing could account for more than one-third of total projected fuel economy improvements through 2040. Globally, it is expected that the average new car to get 48 miles per gallon (MPG) in 2040, compared to 27 MPG in 2010.

Vehicle Efficiency: Costs influence consumer choices

When consumers set out to buy a new vehicle, cost and functionality are top concerns. Buyers consider not only purchase cost, but also the cost of fuel for the vehicle over its lifetime. So while making cars and other light duty vehicles more efficient – and reducing vehicle emissions – is a shared global goal, consumers generally will choose vehicles that meet that goal at the lowest cost to them. Through 2040, it is believed that most consumers gravitating to three options.

  • Technologies that make conventional vehicles more efficient. Because it is relatively inexpensive to improve the efficiency of today’s vehicles, this is the only option in which consumers’ fuel savings over the first five years of ownership equal or exceed their added costs. Technologies such as turbocharging, higher-speed automatic transmissions, improved aerodynamics and reduced weight can improve fuel economy and reduce CO2 emissions by more than 30 percent. We expect automakers will make increased use of these technologies as they seek to meet government fuel-efficiency mandates.
  • Hybrid vehicles. Of all advanced-vehicle technologies, hybrids will offer by far the best value for consumers. By 2030, it is expected that, on average, hybrid vehicles (like the Toyota Prius) will cost about $1,500 more than a similar-sized conventional vehicle, whereas a compressed-natural-gas (CNG) vehicle will be nearly $4,000 more, and an electric vehicle (like Nissan’s Leaf) will be $12,000 more. In the case of the electric vehicle, consumers would not recoup that higher purchase cost within five years unless gasoline prices were more than $10 a gallon; with gasoline at $4 a gallon, it would take more than 15 years to recoup those upfront purchase costs. Additionally, the CO2 emissions of plug-in hybrids and electric vehicles vary significantly based on the fuel source used to generate their electricity.
  • Smaller vehicles. Whether they drive conventional or advanced vehicles, consumers can improve fuel economy – up to 35 percent – by switching to smaller, lighter vehicles.

These economics of consumer decisions will change as the prices of various fuels – gasoline, diesel, natural gas, electricity – rise and fall. Consumers also must consider other factors, such as driving range. Because gasoline and diesel are “energy dense,” they contain more energy per fill-up than ethanol, CNG or electric vehicle batteries; this enhances consumer convenience by reducing the need for refueling stops. Ultimately, the choices made by consumers will determine how the global vehicle fleet and related energy demand evolve in the coming decades. [ii]

Ensuring that there is adequate energy to meet the growth and demand for energy is very important.  In next month’s blog we will look at global energy demand in the Industrial Segment.  The current demand and usage outlook is based a relatively stable global economic and political environment.  Any drastic events on a global basis could have a drastic effect on supply and prices. The professional consultants at Onyx Power & Gas Consultant are always ahead of the current issues that may affect energy consumption and pricing. Now is the time to partner with an Onyx professional consultant to discuss energy management and secure energy prices based on today’s stable pricing.  Volatility in the energy markets makes it too precarious to take chances.  Partner with Onyx Power & Gas in Making Energy Make a Difference!

 



[i] World Bank World Development Indicators 2010, Maritime International Secretariat Services Limited (Marisec)

[ii] Information for this blog was sourced from: 2012 The Outlook for Energy: A View to 2040 by ExxonMobil

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