Gasoline will remain the dominant fuel powering light duty vehicles through 2040, but consumption will drop 24% and market share will shrink 14% as fuel efficiency improves and alternative fuels—led by diesel fuel—increase their penetration into the market, according to a new report released by the National Association of Convenience Stores (NACS).
The 2014 NACS “Future of Fuels” report analyzes projections made by the U.S. Energy Information Administration (EIA) in its Annual Energy Outlook 2014. NACS publishes its annual industry analysis to help retailers make informed investment decisions based on where the market is heading and which fuels are likely to be the dominant products consumed in the coming years.
Despite the continued attention paid to alternative fuel vehicles and the forecast explosive growth with some new technologies, liquid fuels—gasoline, diesel fuel and E85—remain the overwhelmingly dominant energy sources for light duty vehicles, contributing more than 99% of total energy consumed by light duty vehicles, and they are projected to remain above 99% market share in 2040, according to the report.
“Fuels retailers face one of the most expensive decisions of their careers in deciding which fuels to sell, and this decision is further complicated by shifting demand and technology projections. NACS published this resource to give fuels retailers more insight into market direction so that they can best incorporate these trends into their strategic business decisions,” said NACS Vice President of Government Relations John Eichberger, who authored the report.
The energy efficiency of vehicles on the road is expected to improve 42% by 2040, led by increased efficiency of vehicles powered by gasoline, natural gas and propane —each of which is projected to reduce energy consumption per mile by more than 40%. This increased efficiency will lead to an overall 8% decline in liquid fuel consumption by 2040, with a 24% decrease in gasoline consumption that will be partially offset by a 26% increase in diesel fuel consumption and a 2,210% increase in E85 consumption. Consequently, gasoline’s share of the liquid fuels market is forecast to drop from 71.6% to 59.1%, while diesel fuel will expand from 28.4% to 38.8% and E85 will increase from 0.1% to 2%.
While other alternative fuels will see significant growth by 2040, their overall numbers will remain low enough to have a negligible effect on overall energy consumption with more than 250 million vehicles on the road today, the report noted.
“While some advocates claim that their product or technology can revolutionize the consumer fuels market, they could be looking at the future through rose-colored glasses. Therefore it’s important for retailers to understand how the government perceives the future of fuels and use that information to enhance their own opinions of forecasts,” said Eichberger. “NACS encourages all retailers to seek additional information and to carefully evaluate the opportunities and challenges associated with any fuel product in the market.”
“Future of Fuels” evaluates government forecasts for fuel consumption, vehicle inventories and consumer demand. Here are other key findings from the report:
The vehicle miles traveled by light duty vehicles (LDV) are projected to increase nearly 29% by 2040.
Liquid fuels—consisting of gasoline, diesel fuel and E85—will remain the dominant energy source for transportation, losing only a 0.4% share of LDV energy consumption to 99.3% in 2040.
In the vehicle market, the share dominated by gasoline-powered vehicles will drop 14% to 79.9%; market share will increase for diesel powered and flexible fuel vehicles (capable of running on gasoline and E85), reaching 4.1% and 10.7%, respectively.
Current biofuels—ethanol and biodiesel—are forecast to increase from a 2012 supply of 13.58 billion gallons to 15.87 billion gallons in 2040. By 2040, EIA forecasts the availability of 225 million gallons of cellulosic ethanol.
Non-liquid fuel alternatives—natural gas, propane, electricity and hydrogen— will increase their total contribution to the light duty vehicle energy consumption by 125%, but still only contribute 0.7% of the energy consumed by 2040.
Electricity is projected to experience the strongest growth in the non-liquid market, increasing its share of non-liquid LDV energy from 2. 5% to 38.5%.
Hybrid vehicles are forecast to capture the greatest share of the LDV market, growing from 1.1% to 4.4%; plug-in hybrids are projected to have a 2040 market share of 1.0% and battery electric vehicles are expected to capture 0.4%. Natural gas, propane and hydrogen vehicles are projected to combine to capture 0.5% of the market in 2040.
“When considering where to invest for the future, retailers need to explore all of their options and rely on multiple sources for information. EIA’s Annual Energy Outlook provides a valuable baseline for making further evaluations. However, like all projections, they are subject to the model used, the assumptions made and the data currently available. Technological breakthroughs—in either the vehicle or fuels industries—can dramatically change the outcome of the market,” said Eichberger.