On Friday, the Department of Transportation and the Environmental Protection Agency released a proposed fuel economy rule for heavy duty trucks, which would trim an estimated 1.8 billion barrels of oil consumption between 2019 and 2027, and save $170 billion in fuel costs, by requiring truck manufacturers to increase their fuel economy by roughly one third from current levels. The proposed rulemaking is part of a directive by President Obama to move forward with Phase Two of national fuel economy regulations, and the agencies are required to introduce a final rule in early 2016.
Right now, the medium and heavy-duty trucks that would be impacted by the rule achieve a fleetwide average fuel economy of about six miles per gallon. Despite the fact that these trucks only represent about five percent of vehicles on the road, they currently account for 21 percent of oil consumption in the U.S. transportation sector. Heavy-duty vehicles in particular are responsible for roughly 80 percent of this demand.
Under the new rule, a best-in-class, long-haul truck carrying 68,000 pounds of cargo is expected to get at least 10 miles per gallon, up from a range of 5 to 7 miles per gallon today, the EPA said. Vehicle owners would recoup costs associated with the rule within two years because of reduced fuel consumption, officials said.
Most of the news coverage of the recent announcement has focused on the implications for climate change. The New York Times story, “Proposed Rule for Big Trucks Aims at Cutting Fuel Emissions” described the rule as “a major climate change regulation intended to rein in planet-warming carbon pollution,” while the Associated Press called it “the latest move by President Barack Obama to address global warming.” Certainly, the proposal has implications for greenhouse gas emissions from the transportation sector, but describing these regulations as the latest move on climate change misses some of the more compelling developments that this regulation represents. Most notably, the rule will help mitigate the burden of increasing diesel demand from the trucking sector, and is largely supported by the trucking industry.
Significant Fuel Savings
In contrast to the light-duty vehicle segment, energy and oil use by medium and heavy-duty vehicles is forecast to rise rather than fall over the next 25 years, from 2.8 million barrels per day of oil today to approximately 3.4 million barrels per day in 2040. This rise in demand is attributable to an increase in the number of medium and heavy-duty vehicles on U.S. roads (and the corresponding increase in total vehicle miles driven), driven by increasing demand for shipping for industrial and consumer goods. Without the Phase Two rule, the average fuel economy of heavy-duty vehicles is currently expected to increase by less than 15 percent over the next 25 years, from 6.8 miles per gallon to 7.8 miles per gallon—far less than the 10 mpg that will hopefully be achieved under the Phase Two rule.
The following table shows the expected fuel savings in both gasoline and diesel based on the regulatory impact analysis, combining the Phase One and Phase Two rules, and showing these calculations in million barrels per day.
Favorable Response from Industry
Across almost all industries, increased regulation is frequently seen as a burden rather than a blessing. That’s where this set of rules differs from many of EPA’s recent directives: Although the trucking industry has voiced an opinion that emerging technologies require some further testing, the general reaction to the rules has been welcoming.
“Fuel is an enormous expense for our industry,” American Trucking Associations President and CEO Bill Graves told the Associated Press. “That’s why our industry supported the Obama administration’s historic first round of greenhouse gas and fuel efficiency standards for medium and large trucks and why we support the aims of this second round of standards.”
Furthermore, recent research from the International Council on Clean Transportation (ICCT) finds that the efficiency levels sought by Phase Two of the truck rule are feasible and cost effective. In fact, industry is likely to benefit, because of the astronomical burden of fuel costs on the trucking industry. The first round of standards alone will save vehicle owners and operators an estimated $50 billion in fuel costs and save a projected 530 million barrels of oil. According to White House estimates, an operator of a new 2018 semi-truck could pay for the technology upgrades in under a year and realize a net savings of $73,000 through reduced fuel costs over the truck’s useful life. These kinds of savings will only be augmented in Phase Two.
The following chart, from the ICCT, shows the type of technologies the trucking industry is expected to use to meet the new standards, as well as the anticipated payback period. With the exception of hybrid systems, which would pay for themselves in fuel cost savings in roughly 1.25 years, all other technologies would pay for themselves in less than one year.
In the United States and most of the OECD, the transportation sector relies on oil for 92 percent of its total energy consumption. The United is the world’s largest oil consumer, accounting for approximately one fifth of total consumption, or 19 million barrels per day.