Industry Trend Analysis - Policy, Technology Needed To Push Alternative Fuels - JAN 2018

Alternative fuel vehicles will become increasingly important in combating emissions and reducing dependency on oil, though will struggle to compete with gasoline vehicles without supportive policy or a step change in technology. Over the coming decades oil will need to be increasingly prioritised on the areas of the economy where it is less economically viable to substitute. In our view this will be plastics, freight transport and aviation. Over recent years there has already been a clear trend away from the more profligate use of oil in applications such as power generation, heating and in buildings.

This trend is moving towards the transportation sector. According to IEA estimates, around 26% of oil consumed each day is in the road passenger vehicle sector, the largest single share of oil use. Given that passenger vehicles are small, generally travel shorter distances and have a faster comparative fleet turnover, transitioning to alternative fuels would both make a large impact on oil demand had happen faster than in other sectors. Maritime transport and aviation, generally have longer fleet turnovers and need a fuel with a sufficient power-to-weight ratio to move large weights over long distances.

The road vehicle sector will increasingly be the focus of a transition away from oil based fuels. Despite some progress with introducing biofuels and electric vehicles, penetration to date has been minimal. A combination of higher fuels prices, stricter emissions policy and lower emerging technology costs will be needed to spur on this transition.

Direct Crude Burn For Power Falling
Direct Crude Burn (000b/d)
e = BMI estimate based on YTD. Source: JODI

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