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
3	Demand – A Crucial Factor Affecting Capacity Decisions Transportation is major growth sector What could affect future growth?
4	Future: U.S. Transportation Demand Growth Drives EIA’s Reference Case
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
7	VMT: More Vehicles Per Driver and More Miles Per Driver
8	MPG: Efficiency Improvements Leveled Off
9	MPG: Historical Efficiencies Affected Demand Relatively Quickly
10	MPG: LDV Performance & Weight Countered Efficiency
11	MPG: Growing LDV Truck Share of Sales Hindered Fleet Efficiency
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
13	Recent Trends European Union-15 & U.S.
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
16	European Preference for Diesel Grew Quickly since Late 1990s
17	EU-15 Demand Mix Projected to See Declining Gasoline Demand
18	Factors Affecting LDV Efficiency (2003)
19	U.S. & EU Trends Affecting Efficiency
20	Factors 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
21	Factors 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
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
25	New Vehicle MPG Profiles
26	CAFÉ+Hybrid/Diesel Case Far Exceeds Even Europe’s High Diesel Penetration Rates
27	MPG: New Cars Represent 7.5%-8.0% of Total Stock Each Year, But Are Driven Slightly More Than Older Cars
28	Even Fast Penetration of High Efficiency Vehicles Can’t Change Total Stock Quickly
29	Lower Costs May Result in More Miles Driven (3% Rebound Effect)
30	By 2020, CAFE Case Requires 40% Less Additional Supply Than Reference
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.