LONDON Dec 19 Even if the diesel engine's
scandal-driven fall from grace pushes it out of the world's
passenger cars, an increasing need for it on ships, in trucks
and heavy industry could save the refineries that invested
heavily in producing the fuel.
The unfolding crisis that kicked off when Volkswagen
falsified U.S. car emissions has spurred a litany of
changes at vehicle manufacturers, which are now putting their
cash behind electric cars, or back to gasoline engines.
"I'm not concerned for refineries," said Steve Sawyer, head
of refining with consultants FGE. "Diesel for passenger cars is
just one part of the demand pool."
Although oil refiners disagree over how quickly the global
market will turn its back on fossil-fuel-powered cars, the
shipping industry is set to turn to low-sulphur diesel in droves
due to new regulations.
In Europe, the stronghold of diesel engines thanks to
decades of favourable government treatment, that portion is
significant. Passenger cars account for 1.4 million barrels per
day (bpd) of the continent's diesel consumption of 4.1 million
bpd, according to FGE data.
But worldwide, diesel cars make up only about 12 percent of
the car fleet, according to Swiss bank UBS.
UBS warned that its global autos team expects diesel to
"disappear almost completely" from passenger cars by 2025,
falling to a 4 percent market share as hybrids and electric cars
increase their presence.
But this possibility, which it said would leave Europe's
distillate-focused refineries most exposed, does not portend a
rougher ride for margins, thanks to the International Maritime
The IMO earlier this year said it would stick with a 2020
deadline for ships to use cleaner fuels - a move that the
International Energy Agency expects to drive a 2-million-bpd
increase in demand for low-sulphur diesel.
"At 2 million bpd, (shipping demand) would be approximately
20 times higher than the negative impact from lower diesel car
sales in 2020, which we estimate at approximately 100,000 bpd by
then," UBS said in its report.
FGE and others also point to rising economies as a bright
spot for diesel, whose margins have languished over the past two
years as industrial activity took a backseat to consumer demand,
which favoured gasoline use in passenger cars, motorcycles and
other light-duty vehicles.
But if growth shifts back towards industry - and to
developing economies, as many forecast it will - distillates
used in mines, oil rigs and agriculture could get a boost.
ExxonMobil, in its outlook for energy consumption, noted
almost half of global energy use is dedicated to industrial
activity, statistics that Exxon said "often get lost" in
discussions that focus on consumer and household demand.
Heavy goods delivery and haulage vehicles, with a need for
power and torque over speed and efficiency, cannot easily turn
to electric or gasoline-powered engines.
As a result, diesel's use features heavily in the
manufacturing, infrastructure and agriculture that are crucial
to growth in the modern economy, and Exxon said industrial
demand for energy would rise by around 25 percent by 2040.
"That might be the way forward for cars," Sawyer said of
hybrid and electric engines, "but it might not be the way
forward for trucks and delivery vehicles."
(Reporting by Libby George; Editing by Dale Hudson)