U.S. regulators say fuel efficiency pays, despite cheaper gas

▪ U.S. regulators say fuel efficiency pays, despite cheaper gas

According to a recently released article by Thomson Reuters, automakers have the technology to meet aggressive mandates to hike fuel efficiency by 2025, but the fleet-wide improvement will not be as great as the Obama administration once forecast because buyers are switching to pickup trucks and SUVs, federal regulators said Monday.

The report by the U.S. Environmental Protection Agency, the National Highway Traffic Safety Administration and the California Air Resources Board will frame a debate with the auto industry that will be decided in 2018 by the next president.

Administration officials said the key finding of their analysis is that automakers can comply with the mandates using known technology, and deliver benefits in terms of fuel savings and greenhouse emissions cuts that outweigh the estimated $ 894-1,245 per vehicle in costs, the 1,200-page document says. Automakers are sounding alarms that low gas prices make the Obama administration's mandates to cut vehicle greenhouse gas emissions untenable in their current form. Trucks, which generate the bulk of the profits earned by Detroit's three, unionized automakers, are the key.

When the president's administration first outlined its goal of boosting average fleet fuel economy to 54.5 mpg, regulators forecast that 67% of vehicles sold in 2025 would be cars. Since then, gasoline prices have plummeted and truck sales have surged. The agencies forecast cars will be between 48% and 62% of the mix. Regulators now estimate the fleet will average 50 to 52.6 mpg in 2025.

"Given changes in the market landscape, it will be a daunting challenge to meet the very aggressive requirements of the 2022-2025 federal fuel economy and greenhouse gas rule," said Gloria Bergquist, a spokeswoman for the Alliance of Automobile Manufacturers.

The report may give automakers some ammunition to try to win changes to the rules. Because of lower gas prices, the EPA now forecasts owners will need around 5 years for gas savings to match higher vehicle prices, compared with an earlier estimate of about 3.5 years. However, the assessment also finds that battery costs are lower today than they were originally anticipated to be 10 years from now, suggesting hybrid or electric vehicles could be more affordable.

Dan Becker, director of the Safe Climate Campaign, urged regulators to toughen the rules to achieve the original 54.5 miles per gallon fleet-wide target. "We can't accept backsliding or loopholes that undermine their success just to put more gas-guzzlers on the road," he said.

Automakers are not required to achieve the target average. Instead, the government's complex scorekeeping system allows them to hit different targets for different sizes of vehicles - with larger trucks and SUVs allowed to achieve lower targets than small cars.

In addition, the NHTSA and EPA don't agree on some key assumptions. For example, the EPA assumes that California's zero emission vehicle mandates will be in place. These require that 15% of the fleets automakers sell to have zero emissions in that state by 2025. The NHTSA analysis does not assume that automakers will comply with the California mandate. The NHTSA assumes about 14% of vehicles sold in 2025 will need to be full hybrids - those with a significant battery pack - to meet the standards, while EPA thinks 3% would be sufficient. Both forecasts expect improvements in gasoline engines will provide most of the increase in mileage, and compliance with 2025 fuel targets can be reached even if only 3% of vehicles are electric.

Cars and trucks account for 42% of total U.S. oil consumption, or about 8 million barrels a day. Regulators also plan to finalize rules to boost the fuel efficiency of medium and heavy duty trucks through 2027 later this year.

▪ CRC report supports position of biodiesel as low carbon fuel

Scientific experts agree that biodiesel holds significant promise in the effort to reduce carbon emissions. Last year, biodiesel use in the U.S. cut greenhouse gas (GHG) emissions by 18 million tons, or the equivalent carbon dioxide emissions of 3.8 million cars.

A new consensus report from the Coordinating Research Council (CRC) now adds to the growing evidence in support of biodiesel as a low carbon fuel. Key conclusions from this report show that carbon emissions from biofuels are declining relative to petroleum, and confidence in these results are growing with additional study.  

“When it comes to quantifying carbon benefits, biofuels have been the most heavily scrutinized products in the world market,” said Don Scott, director of sustainability with the National Biodiesel Board. “This heavy scrutiny and improving analysis provide confidence that biodiesel provides significant benefits over fossil fuels.”

The CRC, whose members include the American Petroleum Institute, Ford, General Motors, Chrysler, Daimler, and others, directs engineering and environmental studies pertaining to automotive and petroleum use. Since 2009, the CRC has been organizing biennial workshops to examine lifecycle analysis of biofuels. Each of these four international workshops has included a heavy emphasis on indirect land use change. Increasing global production of food and the resulting land use change caused by national agricultural and renewable energy policies was once thought to be a detriment to the net carbon benefit of biofuel policies.

To investigate this theory, the CRC has enrolled the world’s leading experts in economic modelling and lifecycle analysis. The U.S. EPA, the U.S. DOE, and the California Air Resources Board, were joined by representatives from the European Commission, environmental advocacy groups, and leading academic institutions from Europe and North America.

“Whether and how indirect land use change can be accounted for has always been controversial,” said Jan Lewandrowski, an economist for USDA’s Climate Change Program. “With continued improvements to the science behind it, there is clear consensus that it does not override the carbon benefit of renewable fuels. The scientific community’s efforts to improve the data quality and reduce uncertainty within economic modelling shows that the agricultural sector can provide powerful tools to reduce carbon emissions while providing food and fuel to the world. Additionally, regions with renewable natural resources can experience sizable economic benefits by making wise investments in agriculture.”

The growing body of research supporting this conclusion includes noteworthy analysis published by the National Renewable Energy Laboratory, Argonne National Laboratory, USEPA, USDA, and the California Air Resources Board. Each of these institutions has affirmed that U.S. biodiesel reduces GHG emissions by at least 50 percent and often as much as 85 percent compared to petroleum diesel fuel.

▪ First ocean-going vessels that can run on Methanol were delivered in May 2016

The first three of seven 50,000 dead weight tonne (DWT) vessels capable of running on methanol have been delivered in May 2016, with the remaining four to be delivered by October 2016. These seven ocean-going vessels are built with the first-of-its kind MAN B&W ME-LGI 2-stroke dual fuel engines that can run on methanol, fuel oil, marine diesel oil, or gas oil.

This ground-breaking ship technology will significantly reduce emissions while giving ship owners a viable, efficient and convenient fuel alternative. With the growing demand for cleaner marine fuel to meet environmental regulations, methanol is a promising alternative fuel for ships that can meet the industry’s increasingly stringent emissions regulations. Methanol is a biodegradable, clean-burning marine fuel that reduces smog-causing emissions such as particulates, sulphur oxides and nitrogen oxides.

“Working with our partners to advance new, clean technology is an important and innovative step in the right direction. Investing in methanol-based marine fuel reinforces our commitment to invest in sustainable technology that not only provides environmental benefits but also an economically viable alternative marine fuel. The cost to build new and convert existing vessels to run on methanol is significantly less than alternate fuel conversions,” said Jone Hognestad, president, Waterfront Shipping Co. Ltd. (WFS).

Waterfront Shipping will charter the seven vessels to replace older vessels and expand its fleet. Two of the vessels are owned by Westfal-Larsen Management (WL), two vessels are jointly owned by Marinvest/Skagerack Invest (Marinvest) and WFS, and the remaining three vessels are owned by Mitsui O.S.K. Lines, Ltd. (MOL). The ships were built by Hyundai Mipo Dockyard and Minaminippon Shipbuilding Co., Ltd.

“MAN developed these 2-stroke engines in response to interest from the shipping world to operate on alternatives to heavy fuel oil and meet increasingly stringent emissions regulations. To hedge the risk of fuel price volatility, the vessels can switch between fuels, and operate cost-effectively,” said Ole Grøne, senior vice president, head of Marketing and Sales, MAN Diesel & Turbo. The traditional ship naming ceremony for two of the dual vessels owned by WL, with the second as a joint venture with WFS/Marinvest, will take place in South Korea on April 18. Delivery will occur at at the end of the month.

“This investment is very much aligned with our vision and leadership to supply safe and environmentally friendly transports. The ability to run on a sulphur-free fuel offers great potential and provides innovative solutions for the world’s energy needs,” said Patrik Mossberg, chairman, Marinvest.

“To be one of the shipping companies helping to lead this effort makes sense for our business. It’s great to be part of an innovative solution,” said Rolf Westfal-Larsen, president and CEO, Westfal-Larsen Management.

MOL will take delivery of its dual-fuel vessel in Japan on April 22. “We are excited and proud of the delivery of our first vessel, installed with the first dual-fuel engine in Japan. We are pleased that our technical expertise has been utilised for this commemorative occasion. Having these vessels operating on methanol marine fuel provides shippers and port facilities with a practical and diversified fuel solution that meets today’s and tomorrow’s emission requirements,” said Yoshikazu Kawagoe, managing executive officer (Technical), Mitsui O.S.K. Lines, Ltd.

▪ China chemical plants are to shut for G20 Summit

China’s Ningbo and Shanghai Environmental Protection Bureaus have recently released a long plant shutdown list for the upcoming G20 Summit held in Zhejiang’s capital city Hangzhou. The petrochemical plants in the list are required to shut or reduce rates during the period from 25-28 August to 7 September in a bid to clear air quality and as safety precaution measure for the G20 Summit held on 4-5 September.

The list has included two Sinopec subsidiaries Zhenhai Refining & Chemicals (ZRCC) and Sinopec Shanghai Petrochemical, a MTO complex, a PDH plant, huge capacities of PTA, and numerous other basic chemical manufactures. Zhejiang’s Ningbo and Shanghai’s Jinshan districts are major petrochemical production hubs in east China.

While the intermediate chemicals may have less impact as the shutdowns include both upstream and downstream units, demand for petrochemical feedstocks such as naphtha, aromatics, methanol and propane, as well as end-consumer products such as plastics and synthetic fibres will be heavily hurt.

Some producers, who have received the government circulates, said they are trying to talk to the government for some exemptions or reliefs as such policy will cause huge losses to the companies. Hangzhou City has not yet set the shutdown list and more chemical plants may be affected.

▪ Chevron launches “Clean & Glide Technology” at Caltex-branded stations in Hong Kong

Chevron Corp. has launched a new and improved fuel formulation with “Clean & Glide Technology™” at its Caltex-branded fuel service stations in Hong Kong. This fuel was launched earlier in Singapore and Malaysia.

“Our products are continuously being improved in anticipation of future engine advancements and local market needs. For motorists, a quick Caltex stop now delivers fuel grades that help treat their cars right, providing additional benefits without compromise,” said Brian Payne, Chevron’s general manager for products in Hong Kong.

The Clean & Glide Technology™ in the new Techron® is designed to coat and protect metal surfaces. This helps to reduce friction and wear, keeping engines clean to deliver optimum performance.

The ability of the new Techron to protect metal surfaces was proven in the High Frequency Reciprocating Rig (HFRR) lubricity test, a standard test for diesel, designed to determine its ability to protect metal parts in the fuel pumps that rely on diesel as a lubricant. The HFRR lubricity test was modified to safely test the lubricating properties of petrol.

The new Techron with Clean & Glide Technology contains components, which are designed to coat and protect metal surfaces, thereby reducing wear by up to 38% and friction by up to 41% compared to the previous Techron formulation.

In controlled laboratory tests simulating continual use, Clean & Glide Technology produced results, which showed 2-3% less fuel consumption when compared to the previous Techron formula, according to Chevron.

▪ ExxonMobil launches new gasoline formula at US stations

Exxon- and Mobil-branded stations across the United States now feature an improved gasoline that enhances vehicle performance through a proprietary additive formulation with seven key ingredients that helps remove intake valve deposits, which leads to better gas mileage.

The new additive formula, which is part of ExxonMobil’s suite of Fuel Technology Synergy™ products, is a step-change innovation compared to its previous additive package, said Rob Wollard, Americas retail fuels marketing manager for ExxonMobil Fuels, Lubricants and Specialties Marketing Company.

ExxonMobil is one of the world’s largest integrated refiners, marketers of petroleum products and chemical manufacturers.

The gasoline, which was developed at the ExxonMobil research and engineering labs, includes dual detergents to clean key engine parts, such as intake valves. It has been extensively tested to ensure optimum performance, according to an ExxonMobil statement.

Synergy gasoline is available at almost 11,000 Exxon- and Mobil-branded retail stations in the U.S. The breakthrough Synergy forecourt image has been piloted at 50 locations in the U.S. and will be implemented nationwide in a multi-year rollout as part of ExxonMobil’s continuous efforts to enhance customer’s buying experiences.

▪ US gasoline demand is likely to slide

Electric vehicles could slice fuel’s consumption up to 20% in two decades, new report says

Electric cars are poised to reduce U.S. gasoline demand by 5% over the next two decades—and could cut it by as much as 20%—according to a new report being released Monday by energy consulting firm Wood Mackenzie.

The U.S., which currently uses more than nine million barrels of gasoline a day, could see that demand drop by as much as two million barrels a day if electric cars gain more than 35% market share by 2035, according to the report.

That aggressive case assumes Tesla Motors Inc. and other auto makers begin to deliver lower-cost electric vehicles that can travel longer distances in relatively short order, said the report’s author, Prajit Ghosh. A more likely scenario is a 5% drop in U.S. gasoline demand as electric cars build to more than 10% of the U.S. vehicle fleet by 2035, he said.

Even the low end of the forecast by Wood Mackenzie, which provides in-depth analysis for a wide range of clients including large oil companies, utilities and banks, is a more bullish outlook for electric-car adoption than many oil-and-gas companies have espoused.

Spencer Dale, the chief economist of energy company BP PLC, said last week in Houston that while he expects electric cars to start gaining traction, the internal-combustion engine still has significant advantages over electric alternatives and widespread adoption won’t happen in the next two decades.

“It will still take some time,” Mr. Dale said. “Electric vehicles will happen. It is a sort of when, not if, story.”

The electrification of the automobile has evolved more slowly than some expected, in part thanks to low fuel prices and limited battery life that meant drivers had to recharge every 100 miles. But more capable cars are coming to market as tightening air-pollution regulations in places such as Europe and China force auto makers to engineer better electric vehicles.

The U.S. market today remains tiny, with pure electric cars amounting to less than 1% of total sales so far this year. But Tesla’s decision to build cars with sizable batteries that can run for more than 200 miles before recharging has led a number of competitors to double down on their own electric-car designs.

Nissan Motor Co., Hyundai Motor Co. and Volkswagen AG are working on their own long-range electric vehicles. Ford Motor Co. has said it would invest $4.5 billion over the next four years to develop 12 new electric cars and hybrids, and Volvo has set a goal of producing one million electric vehicles by 2025.

Tesla’s Model 3, which is scheduled to begin rolling out to customers in 2017 at a price point of roughly $35,000, has the potential to push electric vehicles into the mainstream in the next decade and cause a significant dent in U.S. fuel demand after 2025, Mr. Ghosh said. “The Model 3 is planting a flag,” he said. “With time, it has the potential to be a disruptive force in the market.”

A few new electric vehicles are expected to make their debuts soon with lower price tags, Wood Mackenzie said. The Chevrolet Bolt—which will cost $30,000 after tax credits—hits the market later this year.

If electric vehicles gain a foothold in the U.S., the impact won’t be all bad for fossil-fuel companies, the report concluded.

While petroleum demand would fall, natural-gas demand would likely go up, because utilities would need to generate more electricity and more of it would increasingly come from natural-gas-burning power plants as well as renewable-energy sources, the report said.

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