On Trucks, Fuels and Cost

Transport and Your Value Chain

Value Chain Diagram

A manufacturer’s value chain usually begins in the natural world, where ultimate raw materials like iron ore, pulp wood or petroleum originate. The value chain then proceeds through some number of processing steps (often with branching steps and recycling loops) all the way through the final disposition of the finished product at the end of its useful life. Between each processing step, there is a transfer — usually a physical transport – of the work in process or finished product.

Heavy TruckThis post examines transfers between facilities, especially transfers using highway trucking. It is useful — and sobering – to construct a rough diagram of your Value Chain, starting with the origin of your ultimate raw materials and passing through the many steps through ultimate disposition. The distances involved can be mind boggling, and even a rough guess at the rolled costs of all of the transports involved even more so. Those costs are directly or indirectly reflected in your costs, and the ultimate customer’s cost. Clearly, the costs of trucking matter.

Transport Costs – Fuel Consumption and CO2 Emissions

Transportation represents about 27% of America’s primary energy consumption. The overwhelming majority of that energy comes from petroleum. Access to petroleum (crude oil) has been a major constraint to the American economy and a key determinant of American foreign policy for over four decades. Carbon dioxide (CO2) emissions to the atmosphere from the combustion of fuels derived from petroleum are believed to be a primary driver of climate change.

CO2 Emissions - Transportation

The chart labeled “Carbon Dioxide: Transportation” projects CO2 emissions from transportation sources through 2040. To good approximation, CO2 emissions can be taken to be proportional to petroleum–based fuels consumed.

The blue line indicates that light-duty vehicles (automobiles and small trucks) are the largest source of emissions (hence petroleum consumed). As you can see, the blue line crests around 2018, then declines rather smoothly. This projected decline is primarily attributed to improvements in vehicle fuel utilization efficiency.

The green line represents emissions (hence fuel consumption) by freight trucks – the vehicles primarily used in schlepping your raw materials and finished goods across your Value Chain. Unlike the blue line, the green line projects rather uniform annual increases into the future. This increase is largely attributed to increasing freight volumes.

Accordingly, for 2016, emissions from light vehicles are about 2½ times those from freight trucks. By 2040, that ratio drops to 1½ times. So, the relative importance of emissions (and petroleum consumption) by freight trucks increases rapidly.

Then What?

The projections behind the chart just discussed represent the U.S. Energy Information Agency’s “Reference Case”. The “Reference Case” is based on demographic, economic and technical projections. These projections assume timely compliance with applicable laws and regulations, such as the CAFE fuel consumption requirements for light vehicles. On the other hand, the projections do not include compliance with laws and regulations not yet finalized by the time the projections were made. Nor do the projections anticipate future technical developments, apart from those incorporated into existing laws or regulations.

So, there is a lot of good news here for manufacturers:

>> The U.S. government is projecting sustained increases in freight shipment volumes in the years to 2040, entailing increasing manufacturing activity.

>> The Government has recently finalized a second phase of its CAFE regulations on fuel consumption efficiency that will reduce fuel consumption in freight trucks by about 45% by 2027, compared to 2010 figures.

>> Possible future technical innovations, such as the use of natural gas as truck fuel, hydrogen fuel cell powered vehicles or electric (or hybrid) vehicles may prove to be practical.

All in all, manufacturers may look forward to increasing freight volumes and falling per ton-mile fuel costs (with corresponding CO2 emissions reductions) in the coming years.


Chuck & Joan in ParisThoughtful comments and experience reports are always appreciated.

…  Chuck Harrington

(Chuck@JeraSustainableDevelopment.com)

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.

Truck image licensed through www.dreamstime.com

Energy Notes from the EIA

The Energy Information Administration (EIA)

The EIA, part of the U.S. Government, compiles and projects statistical data on energy production and consumption. Among the EIA’s many regular publications, the Annual Energy Outlook (AEO) and the International Energy Outlook (IEO) are probably the most comprehensive. The 2016 editions of both publications have recently become available (for free). This post draws on both.

Both publications project data out to 2040. The basic set of projections is labeled the “reference case”. The reference case is a “business as usual” case that projects current trends in view of government demographic projections (like population projections), financial projections (like GDP and inflation rates) and laws / regulations already in place. The reference case does not anticipate technical break-throughs, other than those necessary to meet established laws or regulations. For example, the reference case projects that new automobiles will meet the fuel consumption levels required by the existing C.A.F.E. regulations in the years to 2025, never mind how, technically, that is accomplished.

Fueling Our Past – and Future

Energy Consumption in the US

The graph labeled “Energy Consumption in the United States (1776-2040)” is from the home page of the EIA’s website (www.eia.gov).  Comments:

>> Energy consumption is measured in quadrillion BTUs (“Quads”). One quad is a heck of a lot of energy. As the graph indicates, all of the hydroelectric dams in the U.S., taken together, produce only about 3 Quads annually. Over recent years, the total energy consumption in the U.S. has been around 100 Quads per year.

>> As you can see, the AEO 2016 reference case projects that, over the next 25 years, about 12 Quads of energy from coal will be replaced with an almost equal amount of energy from natural gas. This would cut the use of coal as fuel in this country by about half between now and 2040.

>> Energy production from petroleum is projected to remain almost constant through 2040.

>> Renewable energy (“other renewables”), especially solar energy, is projected to increase rapidly, to almost 10 Quads by 2040. Still, 10 Quads are projected to be less than 10% of the U.S. total energy consumption in 2040.

Energy Consumption Trends

The green line on the graph labeled “Total Energy” projects that total energy consumption in the U.S. will increase slowly between now and 2040. Total energy production (blue line), however, is projected to increase somewhat faster. That means that the U.S. will swing from being a net importer of energy to becoming a net exporter of energy about ten years from now. This, if it happens, will be great news.

US Energy Balance

In my view, the America’s chronic international trade deficit in petroleum has been a huge burden on the U.S. economy. The improvement in U.S. petroleum production rates over the last few years has dramatically lowered world petroleum prices. Those lower prices have resulted in many fewer U.S. dollars going abroad to pay for fuel, and in a nice chunk of change for everybody with every tank full. Moreover, I regard these improvements as the major causal factor in the recovery (such as it is) in the U.S. economy over the last two years.

But wait, there’s more. America’s international relations and foreign policies over the last several decades have been excessively influenced by the need to assure safe access to imported energy, especially petroleum.

So, better global and domestic economics, plus considerably more latitude in foreign relations (including military affairs) – would be great news indeed for America!

Carbon Dioxide Emissions

Carbon Dioxide Emissions Projections

Concerns about global warming / climate change / carbon dioxide (CO2) emissions have been at the forefront of Sustainability issues in recent years. This graph uses figures from the IEO to project reference case annual carbon dioxide emissions through 2040. As you can see, carbon dioxide emissions are projected to rise over the coming years.

 This is in sharp contradiction to almost everything we hear from the media and elsewhere. To be clear: given the “business as usual” conditions upon which the reference case is constructed, carbon dioxide emissions are not going to decline in the coming years. Net reductions in CO2 emissions will require significant changes in policies and / or technologies, in the U.S. and in the rest of the world.


Chuck at the Pacific

 

 

Thoughtful comments and experience reports are always appreciated.

…  Chuck Harrington

(Chuck@JeraSustainableDevelopment.com)

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.