Fuel efficiency needs enforcing

The appreciation of oil prices in recent years and the perceived scarcity of oil in the years to come - in addition to environmental concerns - are having an impact on the transportation sector, especially in the passenger car and light commercial vehicle sectors.

A recent obvious example is the newly proposed regulations in the USA with respect to emissions and fuel efficiency. The Obama Administration is now determined to force changes in fuel efficiency for the first time since 1990. These rules would require manufacturers to bring new cars and light trucks sold in the USA to an average of 35.5 miles per gallon of fuel consumption or 10 miles per gallon more than current standards. The new rules will start from 2012 models and must be fully achieved by 2016.

One important aspect of the new rules is that they will also apply to pickup trucks and four-wheel-drive sport utility vehicles (SUVs) which were exempt from stringent standards for a long time, a trend that has contributed to their widespread use for personal transportation. Even the tax system on these vehicles is more relaxed which again encouraged their use by people who hardly needed them. Of course this has spilled over to other countries in the world where it is now fashionable to use big four-wheel-drive vehicles in cities without any justification.

The drive for fuel-efficient cars goes back to the 1970s when oil prices increased dramatically for the first time. But the drive has been a function of oil prices and there has been some slowdown in improvements since 1986 when oil prices collapsed. In the USA cars are a little more efficient than the standards required because car manufacturers are afraid of the substantial penalties that can be imposed on them even though they were not so keen on improving efficiency in the first place. Shortsighted consumers would also prefer a cheaper car even if it costs more to run. However, current and expected oil prices are changing the views of people and governments towards more fuel-efficient vehicles and transportation systems. Needless to say the new cars will cost more as their development cost will be passed to consumers but this is expected to be offset by the fuel saving in the long run.

Oil companies were not known to be supporters of efficiency because their interests lie in the immediate profit they make from higher fuel consumption. But this need not be the position of oil producers as efficiency may reduce individual consumers' consumption but historically it did not reduce demand growth for oil. The reason is that demand increases more by the number of cars and the miles driven which is always on the rise. Analysts agree that future demand growth will come from consumption in developing countries, especially in Asia. While vehicle ownership in 2005, for example, was saturated in industrial countries at more than 400 vehicles per 1,000 population, it was only 46 vehicles per 1,000 population in the developing countries and the world average is only 143. There is a desire in the rest of the world to catch up, even though the process may be slow.

Therefore, it is not surprising that with all the assumed improvement in efficiency Opec estimates that road transportation fuels will increase from 32.2 million barrels a day (mb/d) in 2006 to 45.1 mb/d in 2030. The oil producers, while interested in selling their oil, are also interested in conserving resources for as long as possible and until other sectors of their economy develop.

In Europe and Japan, standards are probably more stringent than the USA and consumers' fuel prices are much higher because of taxes. Therefore, it is important for developing countries to follow this trend of producing efficient cars, even at a slower rate if needs be. To change social habits would also require government intervention and it should be made more difficult to drive large fuel-guzzling cars in cities when there is no need to do so. It is disappointing that in a recent survey in Dubai, only fifty per cent of four-wheel-vehicles' drivers said they would give up their cars for smaller, more efficient models. Get the rest on board.

- Saadallah Al Fathi is the former head of Energy Studies Department in the Organisation of Petroleum Exporting Countries Secretariat in Vienna.