Diesel Fuel : Use, Manufacturing,
Supply and Distribution
Jim Williams
American Petroleum Institute
Presentation at
2007 Diesel Engine Efficiency &
Emissions Research Conference
August 15, 2007
Diesel Fuel: Use, Manufacturing,
Supply and Distribution
• Key Considerations •
Diesel Fuel Manufacturing and Supply ¾US vs Europe ¾Diesel production technologies • Diesel Fuel Markets • Vehicle Issues ¾Light Duty Diesel (LDD) vehicle markets • Summary/Conclusions Diesel Fuel: Use, Manufacturing,
Supply and Distribution Key Considerations z US refineries are designed to maximize gasoline production ¾ To respond to consumer demand ¾ US diesel demand is driven by heavy-duty applications z European refineries are designed to maximize diesel production ¾ Diesel as the primary transportation fuel ¾ Heavily influenced by tax incentives for diesel
¾ Europe now importing diesel and exporting gasoline Diesel Fuel: Use, Manufacturing,
Supply and Distribution
Key Considerations (Continued) z Refinery design and equipment differences ¾ Between refineries designed for maximum gasoline production versus those designed for maximum diesel production z A major switch to diesel production in the US would require significant refinery re-design z There are many options other than increased LDDs for improving fuel economy Refinery “Cut of the Barrel”:
US vs Europe vs Japan
US Refineries Are Designed and Constructed for Gasoline Production
Gasoline (~47%) Gasoline Gasoline
Kero/Jet Kero/Jet Diesel/Distillate Diesel/Distillate Kero/Jet
Diesel/Distillate Other Other Other
US Europe Japan Fuel Manufacturing and Supply:
US vs Europe z Refinery design and equipment differences ¾ Between refineries designed for maximum gasoline vs those designed for maximum diesel
¾ Gasoline: Catalytic cracking → Volume & Octane 937% of US crude capacity 915% of Europe’s crude capacity
¾ Diesel: Hydrocracking→ Volume & Cetane 9Increased by approx. 60% between 1995 and 2005 z A major switch to diesel production in the US would: ¾ Require significant refinery re-design and major process unit installations ¾ Cost $500 million to $1 billion at many refineries ¾ Require substantial lead time, e.g., 5 - 10 years Diesel Fuel Markets Several Factors Have Caused a Tightening of Worldwide Diesel Supply z Diesel demand in Europe has grown as diesel vehicles replaced gasoline vehicles. ¾ Different tax treatment ¾ Less severe vehicle emissions standards ¾ Improved diesel vehicle performance z Diesel demand has also been growing worldwide ¾ Heavy duty diesel demand grows as the economy grows z US highway diesel demand has been growing at a faster rate than gasoline demand Demand Trends: Gasoline Versus Highway Diesel
350 US 1980 - 2006
300 Gasoline Diesel 250 US diesel demand trending 0 200 higher at faster rate than gasoline 150 1980 = 10
100
50 Diesel estimated for 2006 0 1980 1985 1990 1995 2000 2005
Source: EIA and API Statistics 2005 2005
Exports 2000 Diesel Production
Europe 1995 Diesel Demand Diesel Demand l in Europe and the US Gasoline Production Production Gasoline Demand Gasoline Imports Imports
1990 7 6 5 4 3 2 1 0
5 5 2 0 0 0 2 Motor Gasoline and Diese Imports Imports Imports
(million barrels per day)
0 0 2 0 0 0 2 As Diesel Demand Grew in Europe, Gasoline
Became Surplus and Was Exported, Much to US
5 5 1 9 9 9 1 United States States United Diesel Production Production versus Demand of Gasoline Production Production Gasoline
Diesel Demand Diesel Demand
0 0 Gasoline Demand 9 9 1
9 8 7 6 5 4 3 2 1 0 10 Source: IEA, EIA IEA, Source: stocks Assumed constant EU-15 Demand Mix Forecast Shows Continued
Declining Gasoline Demand Which Benefits US
EU-15 Demand Mix 4000
Diesel Fuel 3500 3000
2500
2000 Gasoline 1500
1000
500 Thousand Barrels Per Day Per Barrels Thousand 0
1990 1995 2000 2005 2010 2015 Source: EIA, History IEA; Forecast Purvin & Gertz Challenges to US Light Duty Diesel Growth z EPA and CARB emissions standards are challenging z Consumer acceptance is uncertain z Diesel fuel consumer cost savings advantage over gasoline vary US DieselPricesAreSometimesHigherThan Gasoline Cents per gallon
Source: Energy Information Administration Cents per gallon 120 170 220 270 320 370 Jan-04 than gasoline gasoline than diesel higher periods when diesel regular, all types Retail Diesel vs. Gasoline Prices Prices Gasoline vs. Diesel Retail diesel types all regular, Jan-05
Jan-06 Jan-07
8/6/07
LDD Vehicles Are One of Several Possible
Options for Improved Fuel Efficiency
z Consumers will decide on acceptance of options based on the: ¾ Cost of vehicles ¾ Cost of fuels ¾ Potential for recovery of incremental vehicle costs through improved fuel economy z Cost – Effectiveness of Some Potential Options Fuel Economy Cost, $ Benefit, % Improved Conventional 26 - 28 800 -1,000 Gasoline
Hybrids 25 - 55 3,900 -5,600 Diesel 33 - 50 2,200 – 3,400
Source: K. G. Duleep, Energy and Environmental Analysis, Testimony at House Science Committee, and 2005 SAE Government/Industry Presentation Cost Recovery Scenarios
Gasoline = Diesel
z Assumptions: » 15,000 mi/yr 700 Target 600
» Diesel vs Gas MPG = 500
26 vs 20 (30%) » $3,000 price premium Annual 400 Savings300 for diesel engine 200 » 5-year payback target 100 0 $2 $2.50 $3.00
Fuel Costs Cost Recovery Scenarios
Gasoline < Diesel
700 z Assumptions: Target 600 » 15,000 mi/yr 500
» Diesel vs Gas MPG = Annual 400
26 vs 20 (30%) Savings300 » $3,000 price premium 200 for diesel engine 100 » 5-year payback target 0 $2/2.25 $2.50/2.75 $3/3.25
Fuel Costs Cost Recovery Scenarios
Gasoline > Diesel
z Assumptions: » 15,000 mi/yr 800 Target » Diesel vs Gas MPG = 700 600 26 vs 20 (30%)
Annual 500
» $3,000 price premium Savings 400
for diesel engine 300 200
» 5-year payback target 100 0
$2.25/2.00 $2.75/2.50 $3.25/3.00
Fuel Costs Summary/Conclusions z US refineries are designed to maximize gasoline production z European refineries are designed to maximize diesel production z A major switch to diesel production in the US would require significant investment and many years for design and construction. z Significant challenges exist for increased passenger car diesel growth in the US z Consumers will decide on acceptance of options based on:
» Cost of vehicles
» Cost of fuels
» Potential for recovery through improved fuel economy