Market Trends — Transportation sector energy demand

Transportation energy use grows slowly in comparison with historical trend

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Transportation sector energy consumption grows at an average annual rate of 0.1 percent from 2010 to 2035 (from 27.6 quadrillion Btu to 28.6 quadrillion Btu), much slower than the 1.2-percent average from 1975 to 2010. The slower growth results primarily from improvement in fuel economy for both LDVs and heavy-duty vehicles (HDVs), as well as relatively modest growth in demand for personal travel.

LDV energy demand falls by 3.2 percent (0.5 quadrillion Btu) from 2010 to 2035 (Figure 88). Personal travel demand rises more slowly than in recent history, with the increase more than offset by existing GHG standards for model year (MY) 2012 to 2016 and by EISA2007 fuel economy standards for MY 2017 to 2020. Inclusion of the proposed standards for MY 2017-2025, which are not included in the Reference case, reduce LDV energy demand by 20.0 percent (3.2 quadrillion Btu) from 2010 to 2035.

Energy demand for HDVs (including tractor trailers, buses, vocational vehicles, and heavy-duty pickups and vans) increases by 21 percent, or 1.1 quadrillion Btu, from 2010 to 2035, as a result of increases in vehicle miles traveled (VMT) as economic output recovers. Fuel efficiency and GHG emissions standards temper growth in energy demand even as more miles are traveled overall.

Energy demand for aircraft increases by 11 percent, or 0.3 quadrillion Btu from 2010 to 2035. Higher incomes and moderate growth in fuel costs encourage more personal air travel, the resulting increase in energy use offset by gains in aircraft fuel efficiency. Air freight use of energy grows as a result of export growth. Energy consumption for marine and rail travel also increases, as industrial output grows and more coal is transported. Energy use for pipelines also increases, even though more natural gas production occurs closer to end-use markets.

CAFE and greenhouse gas emissions standards boost vehicle fuel economy

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The introduction of Corporate Average Fuel Economy (CAFE) standards for LDVs in 1978 resulted in an increase in fuel economy from 19.9 miles per gallon (mpg) in 1978 to 26.2 mpg in 1987. Over the two decades that followed, despite improvements in LDV technology, fuel economy fell to between 24 and 26 mpg as sales of light-duty trucks increased from 20 percent of new LDV sales in 1980 to almost 55 percent in 2004 [124]. The subsequent rise in fuel prices and reduction in sales of light-duty trucks, coupled with tighter CAFE standards for light-duty trucks starting with MY 2008, led to a rise in LDV fuel economy to 29.2 mpg in 2010.

The National Highway Traffic Safety Administration (NHTSA) introduced attribute-based CAFE standards for MY 2011 LDVs in 2009 and, together with the U.S. Environmental Protection Agency (EPA), in 2010 announced CAFE and GHG emissions standards for MY 2012 to MY 2016. EISA2007 further requires that LDVs achieve an average fuel economy of 35 mpg by MY 2020 [125]. In the AEO2012 Reference case, the fuel economy of new LDVs [126] rises to 30.0 mpg in 2011, 33.8 mpg in 2016, and 35.9 mpg in 2020 (Figure 89). After 2020, CAFE standards remain constant, with LDV fuel economy increasing moderately to 37.9 mpg in 2035 as a result of more widespread adoption of fuel-saving technologies.

In December 2011, NHTSA and EPA proposed more stringent attribute-based CAFE and GHG emissions standards for MYs 2017 to 2025 [127]. The proposal calls for a projected average LDV CAFE of 49.6 mpg by 2025 together with a GHG standard equivalent to 54.5 mpg. With the inclusion of the proposed LDV CAFE standards, LDV fuel economy in the CAFE Standards case increases by nearly 30 percent in 2035 compared to the Reference case.

Travel demand for personal vehicles increases more slowly than in the past

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Personal vehicle travel demand, measured as VMT per licensed driver, grew at an average annual rate of 1.1 percent from 1970 to 2007, from about 8,700 miles per driver in 1970 to 12,800 miles per driver in 2007. Increased travel was supported by rising incomes, declining costs of driving per mile (determined by fuel economy and fuel price), and demographic changes (such as women entering the workforce). Between 2007 and 2010, VMT per licensed driver declined to around 12,700 miles per driver because of a spike in the cost of driving per mile and the economic downturn. In the AEO2012 Reference case, VMT per licensed driver grows by an average of 0.2 percent per year, to 13,350 miles per driver in 2035 (Figure 90).

Although the real price of motor gasoline in the transportation sector increases by 48 percent from 2010 to 2035 in the Reference case, VMT per licensed driver still grows as real disposable personal income climbs by 81 percent. Faster growth in income than in fuel prices ensures that travel demand continues to rise by reducing the percentage of income spent on fuel. In addition, the effect of rising fuel costs is moderated by a 30-percent improvement in new vehicle fuel economy following the implementation of more stringent GHG and CAFE standards for LDVs.

Several demographic forces play a role in moderating the growth in VMT per licensed driver despite the rise in real disposable income. Although LDV sales increase through 2035, the number of vehicles per licensed driver remains relatively constant (at just over 1 per licensed driver). Also, unemployment remains above pre-recession levels in the Reference case until later in the projection, further tempering the increase in personal travel demand.

Sales of alternative fuel, fuel flexible, and hybrid vehicles rise

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LDVs that use diesel, other alternative fuels, hybrid-electric, or all-electric systems play a significant role in meeting more stringent GHG emissions and fuel economy standards, as well as offering fuel savings in the face of higher fuel prices. Sales of such vehicles increase from 14 percent of all new LDV sales in 2010 to 35 percent in 2035 in the AEO2012 Reference case. Sales would be even higher with consideration of the proposed fuel economy standards covering MYs 2017 through 2025 that are not included in the Reference case (see discussion in "Issues in focus").

Flex-fuel vehicles (FFVs), which can use blends of ethanol up to 85 percent, represent the largest share of vehicles, at 17 percent of all new vehicle sales. Manufacturers selling FFVs currently receive incentives in the form of fuel economy credits earned for CAFE compliance through MY 2016. FFVs also play a critical role in meeting the RFS for biofuels.

Sales of hybrid electric and all-electric vehicles that use stored electric energy grow considerably in the Reference case (Figure 91). Micro hybrids, which use start/stop technology to manage engine operation while at idle, account for 6 percent of total LDV sales in 2035, which is the largest share for vehicles that use electric storage. Gasoline-electric and diesel-electric hybrid vehicles account for 5 percent of total LDV sales in 2035; and plug-in and all-electric hybrid vehicles account for 3 percent of LDV sales and 9 percent of sales of vehicles using diesel, alternative fuels, hybrid, or all-electric systems.

Sales of diesel vehicles also increase, to 4 percent of total LDV sales in 2035. Light-duty gaseous and fuel cell vehicles account for less than 0.5 percent of new vehicle sales throughout the projection because of the limited availability of a fueling infrastructure and their high incremental cost.

Heavy-duty vehicle energy demand continues to grow but slows from historical rates

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Energy demand for HDVs-including tractor trailers, vocational vehicles, heavy-duty pickups and vans, and buses-increases from 5.1 quadrillion Btu in 2010 to 6.2 quadrillion Btu in 2035, at an average annual growth rate of 0.8 percent, which is the highest among transportation modes. Still, the increase in energy demand for HDVs is lower than the 2-percent annual average from 1995 to 2010, as increases in VMT are offset by improvements in fuel economy following the recent introduction of new standards for HDV fuel efficiency and GHG emissions.

The total number of miles traveled annually by all HDVs grows by 48 percent from 2010 to 2035, from 234 billion miles to 345 billion miles, for an average annual increase of 1.6 percent. The rise in VMT is supported by rising economic output over the projection period and an increase in the number of trucks on the road, from 8.9 million in 2010 to 12.5 million in 2035.

Higher fuel economy for HDVs partially offsets the increase in their VMT, as average new vehicle fuel economy increases from 6.6 mpg in 2010 to 8.2 mpg in 2035. The gain in fuel economy is primarily a consequence of the new GHG emissions and fuel efficiency standards enacted by EPA and NHTSA that begin in MY 2014 and reach the most stringent levels in MY 2018 [128]. Fuel economy continues to improve moderately after 2018, as fuel-saving technologies continue to be adopted for economic reasons (Figure 92).