NACS: Liquid Fuels Will Continue to Dominate in 2040

ALEXANDRIA, Va. -- Liquid fuels will continue to be the top fueling option for drivers for the next two-plus decades. However, the composition of these fuels will undergo significant change.

According to the "Future of Fuels 2013" report released today by NACS, the Association for Convenience & Fuel Retailing, the market share of liquid fuels (gasoline, diesel fuel and E85) will maintain a 99.1-percent share of the fuels market in 2040. However, the volumes of liquid fuels sold will change as fuel efficiency will increase and overall gasoline demand will fall 18.4 percent by 2040.

The report analyzed projections made by the U.S. Energy Information Administration (EIA) in its 2013 Annual Energy Outlook.

"For fuels retailers, there are both positive news and concerns in the projections. The positive news is that liquid fuels will continue to dominate, and these fuels are largely compatible with today's fuels infrastructure. The concern is that there will be significant changes in which fuels are sold, and these changes will not be driven by consumer demand but by government regulation," said NACS Vice President of Government Relations John Eichberger, who authored the NACS report.

"Future of Fuels 2013" evaluates government forecasts for fuel consumption, vehicle inventories and consumer demand based upon full implementation of federal corporate average fuel economy (CAFE) standards and the renewable fuels standard (RFS). According to the analysis, the demand for gasoline will decline through 2040.

On the other hand, demand for diesel will increase 27.4 percent and E85 demand will increase 1,000 percent.

However, even with these projections, gasoline will remain the dominant liquid fuel, capturing 88.2 percent of the market, compared to 3.8 percent for diesel fuel and 8 percent for E85, the report added.

Other key findings from the NACS "Future of Fuels 2013" report include:

• Overall demand for transportation energy is expected to increase by only 1.8 percent by 2040. The amount of energy required to travel one mile will decrease 27.2 percent by 2040, largely offsetting an increase in vehicles and miles driven.
   
• Demand for liquid fuels will peak at 12.49 million barrels per day in 2016, but will decline 7.4 percent from this peak by 2040. Non-liquid energy sources like natural gas, propane, electricity and hydrogen will contribute 0.86 percent to light-duty vehicle transportation energy.
   
• Hybrid, plug-in and electric vehicles will represent 7.4 percent of the light duty vehicles inventory in 2040.
   
• By the time the RFS reaches maturity in 2022, gasoline will need to contain, on average, 27.4-percent ethanol to satisfy the mandate, a level nearly three-fold higher than that in 2012.

"The renewable fuels standard requires the use of 36 billion gallons of qualified renewable fuels by 2022," Eichberger said. "This requirement, when combined with the new CAFE standards, presents a host of challenges to the market, not the least of which is incompatibility of the infrastructure and vehicles.

"EIA's Annual Energy Outlook is the best assessment of how the fuels market might mature, assuming that there are no major adjustments in regulations, disruptions in market dynamics or technology breakthroughs. Retailers who want to maintain customer transaction counts as demand declines must pay attention to the developing trends," he added. "Above all, we need to make sure that infrastructure challenges are addressed and that our concerns and the concerns of our customers are at the forefront of any fuels-related policy discussions."