The Global Oil Demand Driver That Is Being Ignored

Authored by Nick Cunningham via,

When looking at oil demand, oil market analysts focus overwhelmingly on passenger vehicles. One of the hottest debates today is over the prospect of peak oil demand: whether or not electric vehicles along with general trends towards more fuel efficiency will ultimately lead to a peak and decline of total oil demand worldwide. No doubt the upcoming release of Tesla’s Model 3 will spark more than a few columns on how it could be the beginning of the end for oil.

But the conversation often overlooks the role that heavy trucks and freight play in driving demand. The International Energy Agency just published a report arguing that the world needs to get a handle on fuel efficiency for freight, or else oil demand will continue to rise, regardless of how many Tesla’s are on the road.

Freight transit is crucial for economic growth, and indeed, it tends to be correlated with GDP. The IEA says that only four countries – Canada, the U.S., China and Japan – have fuel efficiency standards for heavy trucks, one-tenth of the 40 countries that have rules for passenger vehicles.

“For far too long there has been a lack of policy focus on truck fuel efficiency. Given they are now the dominant driver of global oil demand, the issue can no longer be ignored if we are to meet our energy and environmental objectives Dr. Fatih Birol, the IEA’s Executive Director, said in a press release.

Since 2000, heavy trucks have accounted for 40 percent of the total growth in oil demand, on par with the share for passenger vehicles. Trucks burn about 17 million barrels of oil per day (mb/d), or about one-fifth of total global demand.

Crucially, demand is still growing…rapidly. By 2040, road freight will be responsible for 5 mb/d of demand growth, or about 40 percent of total additional demand over that timeframe. If that occurs, any chance at putting a dent in global greenhouse gas emissions would be significantly undercut by the large increase in emissions from trucking.

Even in industrialized countries like the U.S. and Europe, where oil consumption in passenger vehicles has plateaued, the freight sector is still seeing increasing demand. But most of the growth will come from China and India, where 90 percent of the additional barrels for freight will be consumed.

The IEA urges governments to make progress on restraining demand growth. It cites three possible areas for improvement.

The first area is logistics and operations, which means using things like GPS to “optimize truck routing,” improve supply chain efficiencies so that trucks are carrying heavier loads and making fewer empty trips. Big Data, the “internet of things,” and autonomous trucks fall into this category.


Second, there is plenty of room for hardware improvements. The IEA says that the trucking fleet could use aerodynamic retrofits to reduce drag. Lighter materials, better engines, transmissions and drivetrains can all boost fuel economy. There is also potential for hybrid and even zero-emissions trucks.


Third, there could be a large payoff from the use of alternative fuels, which encompasses biofuels, natural gas, electricity and even hydrogen.

If the sector adopts a range of these improvements, the IEA says it is possible to reduce oil demand by nearly 16 mb/d by 2050, relative to a business-as-usual scenario.

Some areas will be much more difficult to achieve than others, but the IEA says that governments need to focus on several areas: Fuel economy standards; support for the improved use of data for supply chain management; and policies to promote alternative fuels, including R&D, market uptake and refueling infrastructure.

The conclusion from the report is that while everyone is (rightly) focused on passenger vehicles, where indeed, a lot of progress is being made, there is scant attention to freight transit.

The prospects of peak oil demand, at least for light-duty vehicles, is within reach. But unless there is an equivalent campaign for heavy-duty vehicles, crude oil demand could continue to grow for several more decades. That would be just fine for the oil industry, but for governments trying to reduce their oil consumption and make headway on climate change, the policy approach to the transportation sector needs to be much more comprehensive.


GunnerySgtHartman order66 Wed, 07/05/2017 - 15:48 Permalink

I think we'll see semi trucks convert to natural gas before we'll see them go all electric.  It takes an enormous amount of energy to move a fully-loaded semi a long distance, far more than a reasonable quantity of batteries can provide at this point.  400 miles in an electric passenger car is one thing - but 400 miles and more in an electric semi is far more difficult to do.  Batteries may eventually get there, but it will be many years out.Aside from that, fueling semi trucks with natural gas is not that big of a leap, and some truck stops are already offering NG pumps.… is already offering NG-powered trucks, including a Class 8 truck.  Cummins has partnered with Westport to offer NG engines for semis, as well.

In reply to by order66

ejmoosa Wed, 07/05/2017 - 15:26 Permalink

One of the biggest payoffs would be for truckers to avoid heavily congested areas during rush hour.  Yet they choose not to.  I-285 in will have thousands of trucks crawling at 15-30mph during rush hour.Do they just like sitting and wasting their time in the gridlock?If fuel is too expensive, the loads will switch to freight trains for the long haul.When there is competition, there is innovation and limits to how high the fuel prices can rise.

GunnerySgtHartman Hikikomori Wed, 07/05/2017 - 15:53 Permalink

I'd like to see President Trump announce a plan to rebuild American railWhat of "American rail" should the government rebuild?  That's a very vague term.You do know that nearly all railroad tracks in the US are owned by the railroads, right?  And they have to be maintained in accordance with FRA rules.Are you talking about passenger rail?  If there was a profitable demand for passenger rail, don't you think the railroads would be providing it?  Why would they walk away from an opportunity to make money?If you are talking about "high-speed rail," why should the taxpayer take a beating on it?  Where is the demand for it?

In reply to by Hikikomori

STP realmoney2015 Wed, 07/05/2017 - 18:20 Permalink

Read the 2nd Volume of the History of the Union Pacific, by Maury Klein.  You wouldn't believe the interference, even in the early part of the 20th Century by the ICC, Congress and other Government Agencies.  We're talking the 1930's here and the US Gov, was fucking it up, big time!  The UP, merged with the SP or Southern Pacific, early in the 20th Century (1901), but the Government forced them to dissolve and they merged anyway, in 1995.  The Government regulated the heck out of the railroads in the 30's but had nearly zero regulations on the growing trucking industry and the Government, even financed the growth of the Aeronautic sector, with lucrative contracts.  The ICC set rates, decided routes, mergers and even got involved in labor relations.  

In reply to by realmoney2015

GunnerySgtHartman STP Thu, 07/06/2017 - 11:45 Permalink

The government has been way too involved with the railroads, no question.The ICC was actually created at the behest of the railroads because the railroads said that competition was ruining them, and they wanted some stability.  Decades later, the ICC nearly put the railroads out of business because of its onerous regulations.  Indeed, the ICC was the reason the railroads lost so much money on passenger rail travel - the agency forced the railroads to continue offering passenger service regardless of how much money they lost.The ICC also regulated the trucking industry very heavily until the passage of the Motor Carrier Act of 1980.The ICC was a case of "be careful what you wish for."

In reply to by STP

Sofa King Wed, 07/05/2017 - 15:29 Permalink

Hey, some Twat-Waffle was on CNBC earlier claiming that low oil prices are due to "Fake News". Ain't that some shit?

I wonder if they paid him the customary appearance fee for that nugget of nonsense.

pitz Wed, 07/05/2017 - 15:30 Permalink

A little bit of inflation will incent firms to carry more inventory and destroy the just-in-time model.  Inflation will also drive up long-term interest rates meaning that the public sector will no longer be able to heavily incent the trucking industry through subsidies.  A lot of that traffic will hence return to the rails.

Soph Wed, 07/05/2017 - 15:31 Permalink

Uhm, manufacturers lie and fudge their data. Whether it be semi's or pickups, that's what they do.

The more green shit we require them to put into the vehicles, the more they will have to fudge. My F350 Powerstroke with all the cat-crap, piss injectors, etc etc gets horrifically bad mpg relative to a decated, de-greened version. Worse, the cats, etc are hardly a small energy footprint to make what with their unique rare earth metals, etc. Remove them, remove all that wasted energy in the build process, and also increase your mileage by at least 50%, and you are now getting somewhere. Won't happen, I know, it's a great scam that ain't going to change.

As long as we force this supposedly green crap, ACTUAL fuel economy will continue to suffer on all trucks and consumption will continue to rise.

cheech_wizard Wed, 07/05/2017 - 15:32 Permalink

And the article completely overlooks the demand for Bunker Fuel... (eye roll)>No doubt the upcoming release of Tesla’s Model 3 will spark more than a few columns on how it could be the beginning of the end for oil.Because unicorns rub their horns together to create electricity...Standard Disclaimer: Which is why one should avoid articles from at all costs. Poorly written and what's worse, poorly researched.

montresor (not verified) Wed, 07/05/2017 - 15:34 Permalink

Takes torque to haul freight.. Combustion is what fires the piston that spins the turbine that drives energy down the driveshaft and turns the axel.. Somebody is going to fix a solar panel to an 18 wheeler full of beer and drive it up the I-5 Grapevine into LA? ... Is there a hybrid nascar? If there an electric rocket engine at NASA?  Do high performance military aircraft run on tesla batteries?  Will there ever be? Nope. Hell no.. They can't do it without the combustion. If you can't create combustion with flammable refined gasoline,.. then,, you need a nuclear core which we don't do very well.. A lot of Navy ships are nuclear powered, but that's not reflective of any sort of potential domestic mass production..  I don't want some blacked out drunken illegal alien driving his honda civic into the back of a nuclear powered big rig.. That could be very bad..

pitz montresor (not verified) Wed, 07/05/2017 - 15:35 Permalink

Actually electric motors do incredibly well when it comes to torque.  Which is the reason why nearly all trains run on electricity, generated from on-board generators or taken from a "third rail" or overhead caternary, than through a direct mechanical coupling of the engine to the wheels. 

In reply to by montresor (not verified)

just the tip Wrenching Away Wed, 07/05/2017 - 15:59 Permalink

that's a non-comment.  trains of any stripe use electric motors to control the phasing necessary to get the drive wheels to match rotation.  it has nothing to do with hybrid.  WWII submarines used the same propulsion method.  why?  because the people who built trains in peacetime built submarines during wartime.  they already had a proven propulsion system in place, so they used it.  that's why clark gable and cary grant and burt lancaster always went to batteries when they submerged.

In reply to by Wrenching Away

rf80412 montresor (not verified) Wed, 07/05/2017 - 17:56 Permalink

Electric does torque better than gas/diesel.  An electric motor is either on or off - 0% or 100% - so you have to approximate an ICE's acceleration by pulsing the motor.  Electric motors actually convert electricity to motion most efficiently in low speed, high torque applications, while an ICE is the other way around.

In reply to by montresor (not verified)

sheikurbootie Wed, 07/05/2017 - 15:37 Permalink

A very good friend of mine headed a project a couple of years ago for DOE.   He said the semi truck has 3 motors, diesel, electric (boost) and regenerator.  Concept was copied from Formula 1, which they visited frequently and picked the brains of the teams.  It was surprising that the racing industry cooperated fully and willingly. MPG increased over 100%.  The test truck was driven across the country.  It works.  Mass producing and working out the details is in-progress.SuperTruck… 

sheikurbootie OCnStiggs Wed, 07/05/2017 - 18:18 Permalink's a real program.  Peterbilt is participating too.  DOE funded the research/technology, but several truck manufactures jumped in bigly to fund the actual prototypes.  I know DOE had a least one department that spent a year to research on the project.  Now, if we can just mandate that trucks drive in the right lane only and at set speed (like on the autobahn).Government is good sometimes, albeit rarely.

In reply to by OCnStiggs