“No one is saying diesel prices will not go up.”11/27/17
Every day the price of diesel fluctuates and every change impacts transporters and truck drivers. It is notoriously unpredictable, but Volvo Trucks Environmental and Innovation Director, Lars Mårtensson, has a few insights into what the industry needs to prepare for.
“It is impossible to predict diesel prices because they are heavily influenced by political factors, but there is a general feeling that oil prices will not remain as low as they are today,” says Lars Mårtensson, Volvo Trucks Environmental and Innovation Director. “This is due to many different reasons. For one, oil is a limited resource and becoming harder to extract. We do not know how fast prices will rise or by how much, but no one is saying it will not go up.”
As local and national governments implement increasingly stricter requirements concerning emissions, such as Euro 6 and US10, demand for cleaner low-sulfur fuel also grows. In regions such as Europe, since the early 1990s sulfur content in fuel has been reduced and in 2009 down to 10-15 parts per million (ppm). However, in other regions, sulfur can be over 2000 ppm, according to reports by Stratas Advisors´.
Making the transition to low-sulfur fuels requires investment in refineries and production processes, which in turn increases the cost of production and distribution, and by extension, diesel prices.
According to the International Energy Agency (IEA) at the current rate of consumption, it is estimated that the world’s proven oil reserves will last another 54 years.
New oil reserves are continuously being discovered, however often in less accessible locations that require more expensive extraction methods such as deep sea drilling and fracking. As oil becomes harder to extract, prices are likely to rise.
Increased pressure to reduce consumption
Over the past two decades, government legislations have primarily focused on emissions and as a result sulfur, particles and nitrogen oxide emissions have been reduced to almost zero. Now the focus is shifting to reducing CO2 and fuel consumption.
“Emissions are now very low and it is just a matter of replacing old vehicles with new ones,” says Lars Mårtensson. “So now everyone is looking at fuel consumption. In the US and China, we have legislation in terms of declaring fuel consumption, and in Europe we can expect legislation to be in place by autumn 2018.”
At the same time, companies are increasingly prioritizing environmental issues, and factoring in environmental impact in their purchasing decisions. In the transport industry, this is putting pressure on OEMs (original equipment manufacturers) to develop fuel-efficient solutions and invest in alternative fuels.
“More and more transport buyers are demanding high environmental performance from its vehicles and suppliers, and some are willing to pay extra for it,” continues Mårtensson. “So it is not only regulatory pressure that will drive reductions fuel consumption and CO2 – there are also market forces.”