Happy New Year friends! Here’s my take on the five most interesting developments in future fuels trends over the last couple of weeks. That’s right, future fuels ― not just low carbon fuels and vehicles (LCFV) issues. I’m going to continue to cover LCFV issues and trends on this blog and in the newsletter, but I think it’s important to widen the scope a bit. The reality is that conventional fuels and internal combustion engine vehicles will continue to dominate global transport for some time and I think there’s more innovation to come on both which is worth covering for you. I will be doing the same in the service for clients.
Not only is there more innovation to come from conventional fuels and vehicles, it’s important to cover the nexus and timing of LCFV policies and market developments with what’s happening on the conventional side. Moreover, while I expect LCFV policies to take off in regions such as Europe and North America, I am not so sure about regions such as Asia, Latin America and especially Africa. At least, not immediately. And according to the OECD, 90% of vehicle fleet growth will come from these regions, while fuel demand will increase enormously in Asia and, especially, Africa.
Now here’s my selection for the Top 5 this week:
A new MIT study suggests that using carpooling options from companies like Uber and Lyft could reduce the number of vehicles on the road 75% without significantly impacting travel time. Led by Professor Daniela Rus of MIT CSAIL, researchers developed an algorithm that found that 3,000 four-passenger cars could serve 98% of taxi demand in New York City, with an average wait-time of only 2.7 minutes. The team also found that 95% of demand would be covered by just 2,000 10-person vehicles, compared to the nearly 14,000 taxis that currently operate in New York City.
The new system designed by the researchers allows requests to be rematched to different vehicles. It can also analyze a range of different types of vehicles to determine, say, where or when a 10-person van would be of the greatest benefit. The system works by first creating a graph of all of the requests and all of the vehicles. It then creates a second graph of all possible trip combinations, and uses a method called “integer linear programming” to compute the best assignment of vehicles to trips. After cars are assigned, the algorithm can then rebalance the remaining idle vehicles by sending them to higher-demand areas.
Transportation studies put the annual cost of congestion at $160 billion according to a 2015 study, which includes 7 billion hours of time lost to sitting in traffic and an extra 3 billion gallons of fuel burned. That study predicted urban roadway congestion will continue to get worse in the U.S. without more assertive approaches on the project, program, and policy fronts. By 2020, with a continued good economy:
This problem will continue for other countries around the world as urbanization continues. As I have noted before and below, 54.5% of people live in urban areas and this will increase to 70% by 2030.
As ride sharing becomes more popular, I wonder if cities around the world will begin to mandate such services in lieu of one-person taxis or rides simply to manage traffic and air pollution. That would have profound consequences for the auto and fuels industries (biofuels included).
A study published in The Lancet this week and featured in BBC News has found evidence suggesting that living near major roads might adversely affect cognition, particularly dementia.
As many as 11% of dementia cases in people living within 50 m of a major road could be down to traffic, the study suggests. Researchers followed nearly two million people in the Canadian province of Ontario, between 2001 and 2012. There were 243,611 cases of dementia diagnosed during that time, but the risk was greatest in those living closest to major roads. Compared with those living 300m away from a major road the risk was:
The researchers adjusted the data to account for other risk factors like poverty, obesity, education levels and smoking so these are unlikely to explain the link.
Dr Hong Chen, from Public Health Ontario and one of the report authors, said:
“Increasing population growth and urbanization have placed many people close to heavy traffic, and with widespread exposure to traffic and growing rates of dementia, even a modest effect from near-road exposure could pose a large public health burden. More research to understand this link is needed, particularly into the effects of different aspects of traffic, such as air pollutants and noise.”
I’ve covered the expansion of cities and rapidly increasing urbanization from the air pollution perspective and what that could mean for the auto and fuels industries, but a study released this week and featured in The Guardian delves into the agricultural perspective. Read more about it here.
This paper argues that President-Elect Trump and the Republican dominated Congress “have a chance to embrace a mainstream energy agenda with support from both sides of the aisle and deliver on campaign promises to create manufacturing jobs and boost exports” by setting an energy innovation agenda that includes substantial policy reform. The authors argue that this position will resonate with the new Administration, pointing out that Exxon CEO Rex Tillerson and Texas Governor Rick Perry, Trump’s picks for Secretary of State and Energy, respectively, have both advocated for energy innovation. Read more about it here.
This story notes that GoodFuels is currently working on the development of sustainable bio-heavy fuel oil (HFO) from waste and residue streams and that it will be demonstrated in 2017 and is “partnering with refineries across Asia, Europe, and North America to support conversion technology for biofuel production, and is in contact with many ports in Emission Control Areas (ECAs), targeting major ports such as Rotterdam, Hamburg, Antwerp, and Singapore to promote use of biofuels.”
In March 2010, the International Maritime Organization (IMO) amended the International Convention for the Prevention of Pollution from Ships (MARPOL) to designate specific portions of the United States, Canada, and French waters as ECAs. ECAs extend up to 200 nautical miles from coasts of these areas but do not extend into marine areas subject to the sovereignty or jurisdiction of other countries.
IMO member states agreed in 2008 to amend MARPOL Annex VI to establish new tiers or limits with progressive reductions of nitrogen oxide (NOx) and sulfur oxide (SOx) emissions from ship exhausts. The most stringent of the new international emission standards apply to ships operating in designated ECAs. The figure below, from the U.S. Energy Information Administration (EIA) shows the sulfur standards from 2000-2030.
Compliance options associated with marine travel in the ECAs for both new and retrofitted vessels include the use of exhaust controls (e.g., scrubbers and selective catalytic reduction), changing fuels to marine gas oil (MGO) or liquefied natural gas (LNG), and installing engine-based controls (e.g., exhaust gas recirculation). EIA estimates that, at least in U.S. and Caribbean ECAs, distillate (diesel) fuel oil will rise rapidly between 2015-2019 and then decline after 2020, and that ship operators will invest in CO2 scrubbers to remain competitive. Meantime, refiners will market HFO at a significant discount relative to distillate and there may be some penetration of LNG. But drop-in biofuels, not mentioned in EIA’s outlook, could be an option as well.
And that’s why I’m including this in the Top 5 this week because the potential to expand drop-in biofuels into the HFO market for shipping vessels is a huge market opportunity. As the figure below shows, oil demand for the maritime sector is expected to increase 1-1.5 million barrels/day by 2040.
