ALEXANDRIA, Va. -- While some fuel retailers and automakers may be looking at diesel as the heir apparent to gasoline in the United States, a new study points to larger factors that will erode overall domestic demand for the fuel in the long term.
The 32-page study, An Assessment of the Diesel Fuel Market: Demand, Supply, Trade & Key Drivers, was commissioned by NACS' Fuels Institute and conducted by the PIRA Energy Group. The NATSO Foundation, the research, education and public outreach subsidiary of truck-stop and travel-center association NATSO Inc., provided funding. Its main finding: Diesel demand, which has been ex, will begin eroding after 2016 by competition from compressed natural gas (CNG), which is at a price advantage to diesel, and growing vehicle fuel efficiency. PIRA expects a more rapid drop after 2025.
The report said it expects domestic diesel demand to peak in 2015, then fall 12.5% from 4 million barrels per day (BPD) to 3.5 million BPD by 2030, despite the fact that sales of diesel model LDVs have doubled as a percentage of new sales between 2000 and 2010, reaching about 4% in share. PIRA said it expects this number to grow to approximately 10% by 2020 and 14% in 2030, as automakers introduce more models with diesel engines, which are more efficient than gasoline engines and help them meet tougher Corporate Average Fuel Economy (CAFE) standards.
PIRA said it expects LDV diesel demand to more than triple to hit 1 million BPD by 2030 as diesel models grow their share of the vehicle fleet. However, competition from other alternative fueling technologies--in particular, electric hybrids, plug-in hybrids and battery electric vehicles--as well as more efficient diesel engines will depress overall demand.
Competition from alternative fuels--namely, CNG--and more fuel-efficient diesel engines will also provide a large part of the demand headwinds with heavy-duty vehicles (HDV). PIRA expects diesel demand for HDVs to fall 0.5% per year through 2020. Domestic diesel fuel demand for HDVs are expected to fall from nearly 2.6 million BPD in 2014 to 1.8 million BPD by 2030.
Even as domestic diesel demand declines, global demand will grow, the PIRA report found, expected to rise by more than 6 million BPD between 2013 and 2030, pushed by industrialization in emerging markets and increased use as a shipping fuel.
Meanwhile, competition from natural gas and expected increases in vehicle efficiency will cause domestic diesel fuel demand for heavy-duty vehicles to decrease from nearly 2.6 MMB/D today to 1.8 MMB/D by 2030. Other sources of diesel demand also should decline in aggregate due to efficiency improvements and substitution. Total domestic diesel demand is projected to decline 12.5% by 2030.
"Changing consumer demand for diesel fuel will have a significant effect on fuel retailers and the U.S. economy," said Lisa Mullings, president of the NATSO Foundation. "This report will help truckstops and travel plazas develop a sound strategy for optimizing these market changes to lead the fuel retailing industry into the future."
John Eichberger, vice president of government relations at NACS and executive director of the Fuels Institute, said the report's findings are largely positive for fuel consumers.
"The U.S. is very well positioned to supply its own domestic fuel needs while also playing a growing role as a global product exporter," he said. "The expected significant increase in light-duty vehicle demand for diesel fuel should not affect overall domestic diesel or gasoline supplies, nor compromise the nation's ability to contribute to the international market. This is good news for fuel consumers as it indicates this shift in consumption patterns should not create economic imbalances."
Click here to download the report.
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