ALEXANDRIA, Va. -- Liquid fuels will continue to be the dominant fueling option for drivers for the next two-plus decades, but the composition of these fuels will undergo significant change, according to a new NACS report, Future of Fuels 2013, which analyzes U.S. Energy Information Administration (EIA) 2013 Annual Energy Outlook projections.
The market share of liquid fuels (gasoline, diesel fuel and E85) will maintain a 99.1% share of the fuels market in 2040; however, the volumes of liquid fuels sold will change as fuel efficiency will increase and overall gasoline demand will fall 18.4% by 2040.
Demand for liquid fuels will peak at 12.49 million barrels per day in 2016, but will decline 7.4% from this peak by 2040. Non-liquid energy sources like natural gas, propane, electricity and hydrogen will contribute 0.86% to light-duty vehicle transportation energy. Hybrid, plug-in and electric vehicles will represent 7.4% of the light-duty vehicles inventory in 2040.
Overall demand for transportation energy is expected to increase only 1.8% by 2040. The amount of energy required to travel one mile will decrease 27.2% by 2040, largely offsetting an increase in vehicles and miles driven.
The analysis shows that gasoline demand will see a sharp decrease through 2040, while diesel fuel demand will increase 27.4% and E85 demand will increase 1,000%. Even with these projections, gasoline will remain the dominant liquid fuel, with 88.2% of the market, compared to 3.8% for diesel fuel and 8% for E85.
By the time the Renewable Fuels Standard (RFS) reaches maturity in 2022, gasoline will need to contain, on average, 27.4% ethanol to satisfy the mandate, a level nearly three-fold higher than that in 2012.
"The [RFS] requires the use of 36 billion gallons of qualified renewable fuels by 2022," said NACS vice president of government relations John Eichberger, who authored the NACS report. "This requirement when combined with the new CAFE standards, presents a host of challenges to the market, not the least of which is incompatibility of the infrastructure and vehicles."
He said, "For fuels retailers, there are both positive news and concerns in the projections. The positive news is that liquid fuels will continue to dominate and these fuels are largely compatible with today's fuels infrastructure. The concern is that there will be significant changes in which fuels are sold, and these changes will not be driven by consumer demand but by government regulation."
Future of Fuels 2013 evaluates government forecasts for fuel consumption, vehicle inventories and consumer demand based upon full implementation of federal corporate average fuel economy (CAFE) standards and the RFS.
"Elected officials do a lot of great things, but what they don't do well is predict market dynamics and develop programs that help the market work as efficiently as possible. When we consider the fuels market, we must remember that market solutions must be sustainable both economically and environmentally, or they will not work. To do this, we must take an objective look at future trends, identify the challenges and opportunities that exist, and develop strategies to address them."
Founded in 1961 as the National Association of Convenience Stores, NACS is the international association for convenience and fuel retailing. The U.S. convenience store industry, with more than 149,000 stores across the country, posted $681 billion in total sales in 2011, of which $486 billion were motor fuels sales. NACS has 2,200 retail and 1,600 supplier member companies that do business in nearly 50 countries.
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