NPRA 2007 Annual Meeting
U.S. Middle Distillate Demand Changes
•Heavy duty vehicles drove historical distillate demand
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•Any signs of emerging growth in light duty diesel market?
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•Shifts in relative pricing of diesel versus gasoline
Note: Transportation includes on- and off-highway, rail road, farm use, marine.                                                                Source: EIA Fuel Oil and Kerosene Sales
SOver the past decade, the heavy-duty vehicle fleet kept diesel demand growth higher than gasoline.  Jet demand fell back after 9-11, which kept its average growth over the past decade down to 1.2%.  (Future jet fuel growth is projected at 2.3% over the next decade.)  Transportation distillate demand grew on average 3.0% per year.  The other sectors were flat or declined.
SIn 2004, diesel-fueled vehicles were 3.2% of new light-duty vehicle sales.  Most of them were the heavier light-duty trucks within the light-duty vehicles.
SWhile automakers have announced a number of new light-duty diesel-fueled models becoming available in the next few years, there are no clear signs of how many U.S. buyers will opt to buy a diesel-fueled light-duty vehicle.  The price advantage diesel fuel had over gasoline seems to have vanished, and U.S. buyers have memories of the unattractive features of older diesel-fueled vehicles that must be overcome.
SStill, the new diesel-fueled vehicles are very different than the old models, offering both power and efficiency without the old diesel-vehicle smell.  Interest in light-duty, diesel-fueled vehicles could increase substantially. J.D. Power and Associates estimates light-duty diesel sales will exceed 10% of new light-duty vehicle sales by 2015.
SLast year we presented a high diesel-penetration case (15% of light-duty vehicle sales by 2015).  That growth in penetration dropped gasoline sales by 192 thousand barrels per day in 2015 and increased diesel by 139 thousand barrels per day relative to the base case that kept diesel penetration at roughly today’s rate.  Should this kind of adoption of diesels by Americans occur, it could impact gasoline and diesel growth rates  -- increasing diesel by +0.3% per year, and decreasing gasoline by -0.2%.
SRegardless of the diesel penetration rate into the light-duty fleet, U.S. diesel demand should still see high growth rates from the heavy-duty vehicles alone.