Transcript Going nowhere? Will high energy prices change U.S. travel?

Going nowhere?
Will high energy prices change U.S. travel?
David L. Greene
Corporate Fellow
Oak Ridge National Laboratory
87th Annual Meeting of the TRB
January 16, 2008
Washington, DC
Our transportation system uses oil at the rate of
over 6,300 gallons per second, and consumes
more than any other nation’s entire economy.
U.S. Transportation Energy Use, 1950-2006
16
Million Barrels per Day
14
12
10
8
Other
6
Petroleum
4
2
0
1950
1960
1970
1980
1990
2000
Source: Energy Information Administration, AER 2006, table 2.1e.
Gasoline prices are soaring, VMT
is going nowhere.
Price of Gasoline, 1950-2007
$3.00
2006 Dollars per Gallon
$2.50
Annual Highway Vehicle Travel, 1982-2007
3,500
$1.50
$1.00
$0.50
2,500
2,000
$0.00
1950
1,500
1,000
500
12-Month Moving Total
Jan-06
Jan-04
Jan-02
Jan-00
Jan-98
Jan-96
Jan-94
Jan-92
Jan-90
Jan-88
Jan-86
Jan-84
0
Jan-82
Billion Vehicle Miles
3,000
$2.00
1960
1970
1980
1990
2000
If you knew that…would you change?
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What’s going on in the world oil
market?
What about energy security?
What about climate change?
What will we change?
“The real problem we face over oil dates from after 1970: a
strong but clumsy monopoly of mostly Middle Eastern
exporters operating as OPEC.” Prof. M. Adelman, MIT, 2004.
World Price of Crude Oil
2005 $ per Barrel
$70
$60
$50
$40
$30
$20
$10
$0
1950
1960
1970
1980
1990
2000
U.S. Energy Information Administration, 2006, Refiner Acquisition Cost of Crude Oil, Domestic
First Purchase Price prior to 1968.
OPEC members own 69% of the world’s proven oil
reserves and over 50% of the estimated ultimate
resources of conventional oil.
29%
OPEC
USA
RoW
2%
69%
Source: U.S. Energy Information Administration, 2006.
The cartel’s market power was strengthened by growing world
demand, its increasing market share and…the peaking of US
crude oil production in 1970.
U.S. Petroleum Supply, 1950-2006
25
Net Imports
Million Barrels per Day
Domestic NGLs
20
Domestic Crude Oil
15
10
5
0
1950
1960
1970
1980
1990
2000
The cartel has much greater market power in the
short run than in the long run. The result is volatile
world oil prices.
Cartel Market Share and World Oil Prices: 1965-2005
Short-run
$70
2000 $/Barrel
$60
$50
Long-run
2005
$40
1985
1979
1990
$30
$20
1986
$10
$0
20%
1974
2000
1998
25%
30%
35%
1965
40%
OPEC Core Market Share
45%
50%
The total economic costs of oil dependence (versus a competitive
oil market) exceed $4 trillion since 1970 (Greene & Ahmad, 2005).
Today, costs are in the vicinity of half a trillion dollars per year.
Costs of Oil Dependence to the U.S. Economy, 1970-2006
Competitive World Oil Price Constant at $13/bbl
$350
Wealth Transfer
$300
Billions of 2000 $
Macroeconomic Adjustment
$250
Potential GDP Loss
$200
$150
$100
$50
$0
1970
1975
1980
1985
1990
1995
2000
2005
The RATE of world oil use is alarming!
2002
67%
The 2007 NPC report expects
1.1 trillion barrels of oil production
over the next 25 years. More than
consumed in in all of human history.
Remaining recoverable crude oil*
Cumulative Production to end of 2005
979
33%
Billions of Barrels
Cumulative Production to the
end of 1995 was 710! Over ¼
of all oil ever consumed was
consumed in the last 10 years.
* From USGS 2000, USGS 1995, and MMS 1996
Projections of just 2 years ago expected peaking of non-OPEC
supply with OPEC filling the gap. This would increase their
market share and market power.
IEA’s WEO 2006 foresees a non-OPEC plateau with less OPEC
supply and more unconventional resources filling the gap. This,
would boost OPEC’s market power and increase GHG emissions.
The path of least resistance? Unconventional oil resources are vast,
compatible with the existing infrastructure, at prices we have shown we
are willing to pay. And then there is coal.
Oil Cost curve
(includingto technological
IEA “Resources
Reserves” 2005 progress)
Arctic
70
60
Deepwater
Economic price 2004 US $
80
50
40
30
20
Already
Produced
10
OPEC
ME
0
0
1000
2000
EOR
Oil
Shales
EOR
Heavy oil
Bitumen
Other
Conv.
Deep
Water
3000
Super
Deep
4000
Available oil in Billion Barrels
5000
6000
But without carbon capture and storage, unconventional
oil and liquid fuels from coal will produce 20% to 100%
more greenhouse gas emissions.
Source: Farrell, 2006.
Carbon Reservoirs
Atmosphere 800 GtC (2004)
Biomass
~500 GtC
N. Gas
Oil
~260 GtC ~270 GtC
Soils
~1,500 GtC
Coal
5,000 to 8,000 GtC
Unconventional Fossil Fuels
15,000 to 40,000 GtC
Source: Edmonds, 2005
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Transportation will have to reduce its GHG emissions:
transportation is the largest emitter of CO2 of all the end use
sectors – more than any nation in the world except China.
Million Metric Tons Carbon Dioxide
Carbon Dioxide Emissions From Energy
Consumption by End Use Sector, 1980-2005
2000
1800
1600
1400
1200
1000
800
600
400
200
0
Transportation
Industrial
Residential
Commercial
1980
1985
1990
1995
2000
2005
Source: USDOE/EIA, Annual Energy Review 2006, table 12.2.
Nearly all of transportation’s GHG emissions
are CO2 from the combustion of fossil fuels.
600
MMTCE
500
400
300
200
100
0
Carbon
Dioxide
Nitrous Methane
Oxide
Other
It’s us. Highway vehicles, especially passenger cars and light
trucks, account for most (78%) transportation C emissions.
Transportation GHG Emissions by Mode, 2005
Rail
3%
Ships &
Boats
3%
Aircraft
9%
Other
7%
Passenger
Cars
31%
Buses
1%
Heavy
Trucks
19%
Light Trucks
27%
Source: USEPA, 2007, U.S. GHG Inventory, table 2-17.
But will all this have a
significant impact on travel?
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At $100/bbl, oil is almost $2.50 per gallon of
gasoline (42 gals/bbl).
Given the availability of alternatives, the
“long-run” price of oil should not exceed
$100/bbl, IN THEORY.
In reality, massive investments must be
made in a very uncertain oil market.
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OPEC market influence
Greenhouse gas mitigation regime
Recent studies show a decreasing
sensitivity of travel to the price of fuel.
WHY?
Real gasoline prices are as high as ever.
Real Gasoline
Real Gasoline
PricePrices
(2007 $ per gallon)
$3.50
Jun-07
$3.05
$3.00
$2.50
$2.00
$1.50
$1.00
$0.50
$0.00
1950
1960
1970
1980
1990
2000
Motor Gasoline Retail Prices, U.S. City Average, adjusted using CPI-U
But fuel economy is higher today than in 1980.
Gasoline
Prices and In-Use Fleet MPG
FleetRealFuel
Economy
(2007 $ per gallon)
$3.50
35
$3.00
30
Car mpg
25
$2.00
20
$1.50
15
Car + Light Truck mpg
$1.00
10
$0.50
5
$0.00
0
1950
1960
1970
1980
1990
2000
In-Use MPG from Transportation Energy Data Book: 2007
MPG
Real Gasoline Price
$2.50
As a result gasoline cost per mile is lower.
Gasoline
Cost
Mile
Real Gasoline
Costper
for Cars
- Cents per Mile
(2007 $ per gallon)
$0.22
$0.20
$0.18
$0.16
Jun-07
$3.05
$0.14
$0.12
$0.10
$0.08
$0.06
$0.04
$0.02
$0.00
1970
1975
1980
1985
1990
1995
2000
2005
And real fuel cost as a % of disposable
income is lower still.
% of Per Capita Disposable Income
Real Fuel Cost of Driving a Passenger Car 10,000 Miles
% of Per Capita Disposable Income
10.0%
9.0%
8.0%
7.0%
6.0%
5.0%
Jun-07
$3.05
4.0%
3.0%
2.0%
1.0%
0.0%
1970
1975
1980
1985
1990
1995
2000
BEA, Table 2.1, Personal Income and It's Disposition
2005
What will we change?
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Travel
Energy Efficiency
Carbon Intensity of Energy
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All of the above?
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THANK YOU.