Haulin’ Freight

Petroleum Demand – Global Forecast



A recent report [1] projects that global demand for petroleum will increase by about 30% by 2040. The projected growth is based on an increase in global population from the current 7 billion to about 9 billion, with a simultaneous increase in per capita affluence, especially in developing countries. The projected increase is net of quite substantial anticipated improvements in energy utilization efficiency.




The biggest use for petroleum is as fuel for transportation. In the U.S, approximately 94% of all petroleum used as fuel goes to this application, primarily as gasoline, diesel fuel and jet fuel. Other countries are likely similar (I don’t have a global figure).




Dreamstime - Heavy TruckThe report forecasts that the number of personal vehicles on the world’s roads will double by 2040 — while the total petroleum consumed in operating them will be almost unchanged from today, due to improvements in light vehicle fuel efficiency.




However, commercial transport is a very different matter. The report predicts:




“Global economic growth will drive a steep increase in demand for commercial transportation, as business activity and rising incomes enable increased movement of goods – both within and between nations. From 2010 to 2040, demand for energy for commercial transportation will rise by more than 70 percent. Most of this growth will come from heavy duty vehicles, which include freight trucks of all sizes, as well as buses, emergency vehicles and work trucks.”



The report goes on to anticipate that: “Demand for diesel — the most popular fuel for heavy duty vehicles — will increase by 85% through 2040, while gasoline will demand gasoline will fall by about 10 percent.”



The heavy duty vehicle diesel demand figures anticipate a 30% improvement in heavy duty vehicle energy efficiency. Amory Lovins’ Reinventing Fire [2] discusses several practical ways that such improvement can actually happen.




So What?




If global demand for crude oil continues to increase, then the price of crude is unlikely to come down in any sustained sense. A shift in demand from gasoline to diesel prompts another concern. Most petroleum refining capacity was designed to produce predominantly gasoline. To accommodate a lot more middle distillate (diesel and jet fuel) production, along with a corresponding drop in gasoline production will unbalance the capacity of many refineries. So, sufficient refining capacity to produce enough diesel may become a serious supply constraint — and major changes to refining capacity are not so simple, nor are they inexpensive, nor can they be permitted and constructed rapidly, especially in the U.S.




It is possible that some heavy vehicles may be converted to consume natural gas, as Boone Pickens
[3] advocates. The cost benefits of doing so are significant, and facilities for refueling on Interstate highways are already being developed. There are also advances in production of diesel fuels from renewable sources (biodiesel). Persistently upward fuel prices will help make biodiesel fuels more commercially competitive. However, biodiesel capacity sufficient to make a significant dent in the 35 million oil – equivalent barrel per day diesel + jet fuel demand forecast for 2040 strikes me as quite unlikely.




Bottom
Line: Expect persistently increasing diesel fuel prices; therefore expect persistently increasing freight costs.




Freight in the Value Chain




You may have seen this graphic before:





Value Chain Diagram

This time, focus on the spaces between the chevrons. The spaces usually indicate transport. Start at the left, with all the ton-miles of carriage required to produce and deliver your raw materials. Include packaging materials and anything else that goes into producing and delivering your products. Consider in-process materials movements and movements into and out of warehouses, distribution centers or where ever. Then consider freight out, including hauling away wastes. Map it out and add ‘em up. Count on being impressed. Somehow or another, you are paying for all of this carriage. The single best thing you can do to cushion your business from endemic freight cost increases is to shorten the distances involved — the ton-miles of carriage per ton of product delivered. Improving your ton-miles of carriage per ton of product delivered is a straight-forward Lean Manufacturing exercise. If you don’t have Lean Manufacturing expertise in-house, develop some
[4].




Thoughtful comments and experience reports are always appreciated. Click on the title of this post to open the comments section.




…  Chuck Harrington
(Chuck@JeraSustainableDevelopment.com)




P.S
— When it is time for your firm to seriously pursue Sustainability, contact me — C.H.


 


Note: This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New blog posts are published on Wednesday evenings.




A .pdf version of this post is available for free download at:
http://app6.websitetonight.com/projects2/4/9/9/4/2164994/uploads/Blog_Post_-_Hauling_Freight_-_18_October_2012.PDF

Images: Photo: Dreamstime
, www.dreamstime.com. Graphic: Jera.








[1] ExxonMobil, The Outlook for Energy: A View to 2040, www.exxonmobil.com/energyoutlook. Some readers may regard ExxonMobil as a biased source. Still, they know as much as anyone about energy, and their projections don’t need to be spot on (whose are?) — If their numbers are in the ballpark, they are good enough for our purposes here.


 



[2] Lovins, Amory and the Rocky Mountain Institute, Reinventing Fire, Chelsea Green Publishing, White River Junction VT (2011), especially pp. 50 – 56.


 



[3] For more on Boone Pickens and the Pickens Plan, see: www.pickensplan.com


 



[4] For “how to” information on getting started with Lean, see this blog, Lean is at Sustainability’s Core,    http://blog.jerasustainabledevelopment.com/2012/04/04/lean-is-at-sustainabilitys-core.aspx