An increase in overall vehicle efficiencies and the growing use of compressed natural gas for heavy-duty vehicles will more than offset a substantial increase in the number of diesel-powered light-duty vehicles in the market and lead to a decline in U.S. diesel demand beginning in 2016, according to a new report.
U.S. diesel fuel demand is expected to drop 12.5% from a near-term peak of roughly four million barrels per day (MMB/D) in 2015 to 3.5 MMB/D in 2030, according to the report, “An Assessment of the Diesel Fuel Market: Demand, Supply, Trade and Key Drivers.”
The 32-page report, developed by the PIRA Energy Group, was commissioned by the Fuels Institute, with funding support from the NATSO Foundation, to analyze domestic diesel fuel demand, production capacity, international demand, trade balances and the various programs and requirements that might affect overall diesel demand.
While domestic demand for diesel fuel is expected to peak in 2015, global demand for diesel fuel is expected to increase by more than 6 MMB/D from 2013 to 2030, driven by industrialization in emerging markets as well as by increased use of diesel in global shipping fuels, according to the report.
Both domestically and internationally, diesel fuel’s further demand will be strongly affected by new fueling options, shifts in fuel usages and improved efficiencies, whether related to light-duty (passenger) vehicles, heavy-duty (commercial truck) vehicles or industrial applications.
Among the domestic light-duty vehicle fleet, diesel demand is expected to more than triple—from less than 0.3 MMB/D to 1 MMB/D by 2030 as diesel vehicles gain market share. But at the same time, diesel fuel will face competition from new fueling options, especially electrification in its various forms (hybrids, plug-in hybrids, and pure electrics) and further advances in engine efficiencies that will decrease overall fuel demand.
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 NATSO Foundation President Lisa Mullings. “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.”
As U.S.-based demand for diesel fuel decreases, the country will expand its role as a large net exporter of diesel fuel, the report found. On a global basis, refiners should be able to meet anticipated diesel demand through 2030 while keeping yields essentially constant. Diesel fuel and jet fuel are likely to remain premium products, and individual refiners around the world will face economic incentives to maintain or increase their middle distillate yields.
The forecasts are good news for the U.S. petroleum industry, according to Fuels Institute Executive Director John Eichberger.
“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. 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,” said Eichberger.
The report is available for download at fuelsinstitute.org.