Sep
19

Heavy Duty Vehicle Fuel Economy Matters to All Americans

 

Earlier this year, President Obama announced a plan to bolster the fuel economy of the nation’s medium- and heavy-duty trucks. The new rules, to be prepared by the Environmental Protection Agency (EPA) and the Department of Transportation (DOT), will expand on the first-ever fuel economy standards for heavy-duty vehicles finalized in the administration’s first term. The current rules raised fuel efficiency standards for model year 2014-2018 vehicles by between 9 and 23 percent, with the larger increases impacting the less efficient vehicles. While heavy-duty vehicles represent just four percent of registered vehicles on the road in the U.S., they account for roughly a quarter of on-road oil consumption. A few more facts about fuel consumption from heavy-duty vehicles:
  • The first round of standards will save vehicle owners and operators an estimated $50 billion in fuel costs and save a projected 530 million barrels of oil.
  • According to White House estimates, an operator of a new 2018 semi-truck could pay for the technology upgrades in under a year and realize a net savings of $73,000 through reduced fuel costs over the truck’s useful life.
  • AT&T, through its acquisition of more than 7,500 alternative-fuel vehicles for its corporate fleet, has purchased 7.7 million fewer gallons of gasoline from the beginning of the program through the end of 2012.
  • Since the development of the 2014-2018 rules, engine efficiency and overall fuel economy has increased 50 percent, from about 6.5 miles per gallon to about 9.75 miles per gallon.
  • Every mile per gallon gained in fuel economy is worth thousands of dollars in fuel cost savings per truck, per year.
More efficient trucks aren’t just good news for the trucking industry. New estimates from the Consumer Federation of America (CFA) show that Americans spend nearly as much money every year on heavy-duty shipping fuels as they do on gasoline. In 2011, for example, household spending on gasoline was estimated at roughly $2,150. In addition, consumers spent $865 on gasoline fuel for commercial light-duty trucks, and $1116 on diesel fuel for medium and heavy-duty commercial trucks—for a total of $1,981 per household on shipping costs. As much as motorists resent the cost of gasoline, they are paying nearly double their gas bill on transporting other goods and services without even realizing it. 2013’s household gas bill was roughly similar to 2011’s. According to CFA’s estimates, increasing truck fuel efficiency by 50 percent would save the average household about $250 per year. Fifty percent might sound like a massive challenge, but given that most trucks only get 5-6 miles per gallon, improving efficiency to even 7-9 mpg would have a dramatic impact. CFA also estimates that, as fuel prices rise, household savings could increase to $400 per year by 2035. If we focus on medium and heavy-duty trucks alone, the numbers suggest that for every dollar Americans are spending on gasoline for personal mobility, they are spending $0.50 for movements of the other goods and services they consume. Most people probably couldn’t tell you this fact off the top of their head, but the concept appears to be understood by the general population. How do we know? Because according to CFA’s polling research, 75 percent of Americans favor strengthened fuel economy standards for trucks. “Consumer support for big truck fuel economy is already substantial, and as consumers better understand the impact these policies have on their pocketbooks, public support for these policies will become even stronger,” said Jack Gillis, CFA’s director of public affairs. Additional research from CFA shows heavy-duty fuel costs can be felt throughout the rest of the economy. The ways that transportation fuel costs are passed on to consumers is demonstrated through econometric models, and economists use multipliers to understand how costs from certain industries reverberate through others. Some sectors are more influential than others—which is reflected in the size of the multiplier. The size of the multiplier for transportation falls in the top-third of all economic sectors, with fuel costs representing the single largest share (one-third) of all transportation costs. Conversely, incremental reductions in fuel expenses for the trucking industry will increase demand for shipping services, generating a positive multiplier effect throughout the economy. Will improved standards burden the trucking industry? It is believed that the payback for improved technology will be rapid. For example, EPA estimates that to achieve a 28 percent improvement in fuel economy for Class 8 vehicles (tractor-trailers) by 2018, it would take $6215 of up-front investment. This would improve the MPG of the vehicle from 6.5 to 7.8 mpg. If the driver travels 120,000 miles per year and the cost of diesel fuel is $3.88 per gallon, the truck driver will recoup their investment within 6 months, and earn an additional $43,000 in savings over the next four years. For context, the four-year cost of fuel for a tractor-trailer driver is $286,523. Strengthening fuel economy for heavy duty vehicles bolsters more than our energy security—it makes sense for the entire trucking industry, while creating savings that can be passed on to consumers.  
Sep
17

Understanding Inelasticity of Transportation Demand

 

Last week, the Bureau of Labor Statistics released its latest numbers on consumer spending for 2013. Drawing from the updated figures, we did a write-up of the burden of gas prices on American households, particularly its lowest earners. Overall, 5 percent of U.S. household spending is dedicated to gasoline, with that figure approaching 12 percent for the lowest-earning quintile. However, ...

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Sep
15

Oil’s Role in the Scottish Independence Movement

 

Control of resources is often central to the question of national sovereignty. Oil, composing around 40 percent of global energy demand, lies at the heart of many a peoples’ struggle for independence—look no further than the Kurdish Autonomous Region, South Sudan, or Libya for evidence of its power in geopolitics. But while oil is well understood to be a matter ...

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Sep
12

Research Roundup: EV Reports from EEI and UBS

 

Two new research papers released in recent weeks shed light on the real potential of electric vehicles to upend traditional energy systems as we currently know them. The first report, from Edison Electric Institute, lays out an unambiguous business case for why the power sector needs vehicle electrification to take off and should take various aggressive measures to help expedite their ...

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Sep
12

Latin America, Heavy Crude, and Resource Nationalism

 

Mexico nationalized its oil industry in 1938, expropriating foreign assets and forming a decisive monopoly around exploration, production, refining, and distribution. In 1975, Venezuela did the same thing while retaining the right to form contracts with foreign companies. As usual, these state-owned enterprises, Pemex (Petroleos Mexicanos) and PDVSA (Petroleos de Venezuela) are subject to overstaffing, underinvestment, political interference, and institutionalized ...

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