Daily Energy Report
US fuel economy, Saudi crude/product exports, China seeks Russia LNG exemption, Russia’s arctic tanker problem, Ships avoid Red Sea, China’s EVs, Japan extends nuclear, US offshore wind, and more.
Happy Holidays! We will not publish the Daily Energy Report on December 26 or on January 2 & 3. This will give members of our team time with their families and an opportunity to return form their travels. However, we will be in touch in case of breaking news.
Chart of the Day: Has Average Fuel Economy Improved?
Production Share and Estimated Real-World CO2 Emissions
The EPA issued a report entitled: “The 2023 EPA Automotive Trends Report.” The EPA claimed that vehicles set fuel economy set record in 2022. Some media outlets and analysts went crazy over the “great news” from the EPA.
The panel on the left side of Figure (1) above shows production share of vehicles by type. It shows the spectacular change in consumer taste that led to a major increase in truck SUVs and the large decline in small cars. The panel on the right side shows trends in emissions by each segment.
EOA’s Main Takeaway
The EPA statement and conclusions are misleading.
The key word is “average,” and that average includes electric vehicles! You cannot talk about “fuel economy” the same way we have been talking about in the last 50 years and include electric vehicles. Take electric vehicles out, and we find that fuel economy is flat!
As we discussed in a report several months ago, and shown in Figure (1) above, the market structure has changed. The share of light trucks and SUVs increased substantially at the expense of smaller cars. Hence, the total emissions are different from looking at the improvement in individual car model emissions. The fuel economy of all cars improved and as a result, their emissions also declined. Using the EPA data above, even after all the improvement, moving from a sedan with 260 (g/mi) to a truck SUV with 364 (g/mi) means an INCREASE in emissions by 104 (g/mil). Now look again at Figure (1) to see the massive substitution that took place in recent years which led to a flat average.
This is a significant conclusion. This means the large decline that the IEA and OPEC are predicting in oil demand (because of increased fuel economy) is not going to happen. Therefore, global oil demand will be higher than current expectations.
But the problem is even worse: car companies like GM and Ford and others are no longer focusing on fuel economy as they move to electric vehicles! This is a serious problem. If there are no ICE cars, there is no reduction in demand due to fuel economy. Therefore, the long term outlooks double counting the impact of electric vehicles and the fuel economy of ICE vehicles?
Story of the Day
Saudi Crude Oil Exports Decreased
Social media, especially X, is circulating tweets and charts showing a decrease in Saudi crude oil exports in December. Some pundits are claiming that this decrease will balance the market quickly, while others are talking about a significant increase in prices.