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Don't rely on trucking to prop up future oil demand

By 2050, oil demand could fall by the combined current production of Russia and Canada, if the world gets serious about cutting emissions from the trucking industry

Volvo's decision to launch only hybrid-or electric-car models after 2019 is just the latest sign that the passenger vehicle market is inching away from the internal combustion engine as a driving force. Trucking, however, has been regarded as safe territory for the oil industry for years to come, given the range and power limitations of electric propulsionbut now this assumption is being questioned too.

It's easy to think of trucking as a much smaller market for the oil industry than cars in terms of oil consumption, given the relative numbers of vehicles on the road. But, as the International Energy Agency (IEA) points out in a new report, the greater consumption and miles driven by trucks means that's not the case.

While road passenger vehicles accounted for more than a quarter of oil consumption in 2015, road freight was not far behind, on 18%. Trucks have also been a major driver for oil-demand growth. In the period 2000-15, consumption from the road-freight sector-mostly as diesel-rose by almost 6m barrels a day to nearly 17m b/d. That represents over 35% of the net increase in global oil demand in those 15 years, according to the IEA.

The data are even more dramatic when looking at diesel. Road freight accounted for about 80% of the global net increase in demand for that fuel in 2000-15 and generates roughly half of global diesel use now.

So, what happens to fuel demand from the trucking matters to the oil industryand, as one scenario outlined by the IEA shows, a serious chunk of revenue could be under threat, as measures to cut greenhouse-gas emissions are implemented.

In "The future of trucks, implications for energy and the environment", the agency compares two scenarios. The reference case analyses the outlook for energy demand and emissions growth from road-freight transport by considering only relevant policies and measures already adopted today or which have been announced, even if the precise targets have yet to be defined.

The agency's Modern Truck Scenario (MTS) bases its outlook on "the ambitious but attainable deployment of technologies, policies and innovative business practices that deliver the same services as in the Reference Scenario, but with radically reduced vehicle activity, less overall movement of goods, and reduced energy demand and emissions."

The MTS rests on three main foundations: vehicle efficiency and fuel economy improvements, systemic improvements-such as better supply chain and fleet management-and the potential for a shift towards alternative fuels in trucking.

One eye-catching figure here is that, under the MTS, in 2050, oil demand from road freight vehicles would be nearly 16m b/d lower than in the Reference Scenario, which, the IEA points out, is roughly equivalent to the current oil production of Canada and the Russia combined. Under the Reference Scenario-that is, without further policy changes-oil demand from road freight vehicles would rise by 5 m b/d from current levels by 2050.

Could the decline envisaged under the MTS really happen?

Road freight accounts for more than 35% of transport-related CO2 emissions, and about 7% of total energy-related CO2 emissions. So, while it's easy to take the view that the MTS is aspirational and unlikely to come to pass in its entiretyespecially in the era of climate-change scepticism at the top of the US governmentthere is good reason for the sector to come under scrutiny, if global warming is to be contained.

It's also worth bearing in mind, that most of the growth in oil demand from the trucking industry is forecast to take place not in the US, but in growing Asian and developing world markets.

Under the Reference Scenario, emerging and developing countries in Asia-notably China and India-would account for some 90% of the net increase in road freight oil demand to 2050, equivalent to around 30% of total oil demand growth from all sectors. But countries such as China and India are developing a focus on new vehicle technology and improving energy efficiency, so improvements there would make a big difference to overall energy demand.

Meanwhile, trucking firms in the US are just as keen on the cost savings produced by greater fuel efficiency and logistical improvements as anyone else, whatever their government's view of carbon emissions.

The IEA isn't suggesting that the trucking sector is going to decarbonise overnight. Even if the aspirations outlined in the MTS were adopted as targets by governments and the industry, implementing many of the measures would be highly challenging.

Applying electrification to trucks is more complicated than doing so with carsthey're bigger and heavier. The batteries need to be a lot more powerful and more durable than they are now, without becoming too big to install, if they are to become a viable alternative to diesel. At the same time, the power plants producing the electricity need to be clean themselves to make serious CO2 savings and make the switch worthwhile.

Alternative fuels, such as natural gas, biofuels and hydrogen could provide a substitute for diesel, but they all have problems. Concerns have been raised over how much alternatives would actually save in terms of greenhouse gasses when viewed on a well-to-wheel or crop-to-wheel basis. Increased biofuel output raises questions over land use, while hydrogen production is expensive and, like compressed natural gas, needs a massive scaling up of refuelling infrastructure.

But if there's a will there may be a way. And measures like improved fuel efficiency and better-organised logistics will emerge simply because they save money, as well as carbon emissions.

Uncertainty over future demand from the trucking industry is yet another in a growing list of concerns for an oil industry already struggling to gauge how much to invest in future production.

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