17. "China To Raise Electricity Prices," Power Economics, Vol. 2, No. 5 (June 1998), p. 9. 18. I.M. Sahal, "A New Power Policy." Independent Energy (April 1997), p. 33. 19. "The Private Sector: Cautiously Interested in Distribution in India," Electricity Journal, Vol. 11, No. 5 June 1998), pp. 23 and 24. 20. Standard and Poor's DRI Energy Group, "Asia's Economic Crisis and the Electricity Industry," Viewpoints, web site www.dri.mcgraw-hill.com/ energy/vwpoint3.htm (March 1998). 21. "The Electricity Business. Power to the People." The Economist (March 28, 1998), p. 61. 22. "Uruguay Promoting Projects in Bid To Be Regional Energy Link," Latin America Power Watch, Vol. 4, No. 6 (July 1998), p. 11. 23. "Brazil, Argentina Reach Accord To Open Trade in Power," Latin American Power Watch, Vol. 3, No. 8 (September 1997), p. 4. 24. H. Tricks, “Latin America: End of the Dark Age," Financial Times (June 9, 1998). p. 2. 25. "Brazil and Venezuela Find Togetherness," Financial Times (July 17, 1996), p. 4. 26. "World Bank Queries the Central American Grid," Power in Latin America, No. 35 (May 1998), p. 35. 27. Energy Information Administration, Annual Energy Outlook 1998, DOE/EIA-0383(98) (Washington DC, December 1997), p. 50. 28. W.A. Koch, "Alberta Restructures Its Electricity Market," Electrical World, Vol. 210, No. 5 (May 1966). pp. 50-52. 29. J. Friedlan, "Mexico Sets Reforms To Open Up Power Sector," The Wall Street Journal (February 4, 1999), p. A17. 30. "Largest Independent Power Plant Project Financing in Africa & the Middle East Completed," Milbank, Tweed, Hadley & McCloy, press release, web site www.milbank.com/press74.html (New York, NY, December 1997). 31. DRI/McGraw-Hill, World Energy Service: Africa/Middle East Outlook (Lexington, MA, April 1998). p. 19. 32. Energy Information Administration, Country Analysis Briefs: Côte d'Ivoire, web site www.eia.doe.gov/ emeu/cabs/cdivoire.html (March 1998). 33. "Nigeria: Mobil To Build IPP." Independent Energy. Vol. 28, No. 8 (October 1998). p. 10. F Transportation Energy Use Transportation energy use is projected to constitute more than half of the world's oil consumption in 2020. Developing nations account for more than half the expected growth in transportation energy use in the IEO99 forecast. The International Energy Outlook 1999 (IEO99) presents a more detailed analysis than in previous years of the underlying factors conditioning long-term growth prospects for worldwide transportation energy demand. A nation's transportation system is generally an excellent indicator of its level of economic development. In many countries, personal travel still means walking or bicycling, and freight movement often involves domesticated animals. High rates of growth from current levels in developing countries such as China and India still leave their populations with very limited transportation services in 2020 by industrialized standards. Currently, transportation energy accounts for 48 percent of world oil demand (Table 19). Since 1970 transportation energy demand has grown by 110 percent or 18 million barrels of oil per day. The IEO99 reference case projection indicates growth in transportation fuel use of 77 percent or 27 million barrels per day by 2020. Virtually all demand growth involves increased use of oil products, and transportation accounts for 69 percent of the projected growth in oil demand over the next two decades. On a percentage basis, the increase in transportation energy consumption more than doubles the projected rise in world population. Developing countries account for 55 percent of the expected growth in transportation energy demand. Growth in transportation sector energy demand within 2 2 Note: World totals include Eastern Europe and the former Soviet Union (EE/FSU). United Mexico United Japan South China Middle States Kingdom Korea East Sources: 1980: Derived from Energy Information Administration (EIA), Office of Energy Markets and End Use, International Statistics Database. 1996: Derived from EIA, International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). 2020: EIA, World Energy Projection System (1999). Figure 74. Total Transportation Energy Use by Sources: 1980: Derived from Energy Information Administration (EIA), Office of Energy Markets and End Use, International Statistics Database. 1996: Derived from EIA, International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). 2020: EIA, World Energy Projection System (1999). percent between 1996 and 2020, more than double the rate of growth in the industrialized countries (Figure 75). Expected incremental annual consumption totals almost 15 million barrels per day-an amount greater than North America's total demand for transportation energy in 1996. The greatest gains are expected in developing Asia and Central and South America,17 where transportation energy demand has tended to keep pace with high rates of economic growth. The transportation sector underwent fast-paced growth in developing Asia in the 1990s. In fact, several countries in this region, including South Korea, Malaysia, and Thailand, had growth rates of more than 10 percent per year in the first part of the decade (2, p. 10]. Although the economic recession that began in 1997 and continued through 1998 has dampened the short-term expectations for growth in transportation energy use, the IEO99 reference case still projects growth of 4.2 percent annually between 1996 and 2020 in developing Asia (Figure 76). In China alone, transportation sector energy consumption is expected to grow by almost 7 percent per year as the government pledges major investments in the country's transportation infrastructure, including railway. road, and inland waterways. In 1997, Chinese Premier Li Peng announced that China would add some 3,400 miles of railroad and 68,000 miles of road between 1995 and 2000 [2. p. 59]. In Central and South America, energy use in the transportation sector is also expected to grow by 4.2 percent 17 Central and South America comprises two regions modeled in the World Energy Projection System-Brazil and the rest of Central and South America. Mexico-included in North American totals in this report unless otherwise noted--is also projected to sustain high rates of growth. Individual forecasts for Mexico are provided in Appendix E. 57-713 99-35 annually over the projection period. Argentina and Brazil have the most advanced transportation infrastructures in the region, with motor vehicle densities of 170 and 93 per thousand population, respectively, in 1995 (compared with 30 vehicles per thousand people in Peru) [3, p. 11]. In Argentina, rising per capita income over the past several years has meant a rapid increase in demand for automobiles. Automobile and truck production increased by 42 percent in 1997 to meet Argentina's vehicle needs, as well as those of other Mercosur trading nations 18 [4, p. 32). The EE/FSU region shows some growth in transportation energy use in the forecast, but the projected gains barely counter the effects of the recent disastrous economic decline in the region. Energy consumed in the transportation sector in the EE/FSU region is about 45 percent lower than it was in 1990. Most of the decline is attributed to countries in the former Soviet Union, where transportation sector energy use fell from 2.7 million barrels per day in 1990 to a low of 1.2 million barrels per day in 1994. Since then, energy use for transportation has stabilized and increased slightly to 1.3 million barrels per day in 1996; but in the IEO99 reference case, energy demand in the FSU transportation sector does not recover to its 1990 level by the end of the projection period. In contrast, transportation energy use in the countries of Eastern Europe, which are well on the way to economic recovery, has already nearly returned to its 1990 level and is projected to double from its 1996 level by 2020. The projections presented in this chapter, while more detailed than those included in earlier issues of the international Energy Outlook, nonetheless still reflect a simple framework of analysis (see box on page 119). The key variable for the projections is economic growth, applied to designated modes of transport: road, air, and other (rail, water, and pipeline). The largest component is road transportation. The factors shaping the growth of energy use for road transportation include the motor vehicle population and average use of fuel per vehicle. Highlights of the IEO99 projections for transportation are as follows: •Road vehicles maintain a dominant share (over 70 percent) of transportation energy use throughout the forecast. World growth averages 2.4 percent per year between 1996 and 2020, the same rate as between 1980 and 1996. Road energy use among industrialized nations, however, is expected to grow mare slowly than in recent years. •In the reference case, the world population of mad vehicles passes 1.1 billion by 2020-425 million above the level in 1996. The projected increase rivals the 1996 vehicle population of all the industrialized nations combined. •The most important factor influencing the future size of the world's vehicle fleet is the degree to which developing Asia and Central and South America do in fact undergo rapid motorization. These two regions account for 52 percent of the projected increase in the world vehicle population. •Fuel consumption for air transportation increases by an average of 3.7 percent per year between 1996 and 2020, compared with 2.3-percent annual growth between 1980 and 1996, and is expected to account for 16 percent of transportation energy use in 2020, up from 12 percent in 1996. Faster growth in fuel use results from an assumed slower rate of improvement in aircraft fuel efficiency, as well as expectations for increasing use of aviation for business and vacation travel. Transportation's Role in Energy Two key historical trends are projected to continue in the IEO99 forecast: transportation's share of total primary energy use shows little increase, while its share of oil consumption grows steadily (Figure 77). These patterns continue for individual countries and regions, and they continue to characterize aggregate world energy mar kets despite persistent differences in market shares among regions. 18 Mercosur member nations are Argentina, Brazil, Paraguay, and Uruguay.. 502 1980 1985 1990 1995 2000 2005 2010 2015 2020 Sources: History: Derived from Energy Information Administration (EIA), Office of Energy Markets and End Use, International Statistics Database and International Energy Annual 1996, DOE/EIA-0219(96) (Washington, DC, February 1998). Projections: EIA, World Energy Projection System (1999). The transportation share of primary energy consumption in industrialized nations is projected to average 26 percent in 2020, up from a 23-percent average share in 1996. Among developing nations the average share is 17 percent in 2020, up from 16 percent in 1996. In the EE/FSU region, where transportation has historically made up a smaller part of total energy use, its share recovers from recent dips but still reaches only 10 percent by 2020. Total world oil consumption is expected to increase at an average annual rate of 1.8 percent between 1996 and 2020 in the reference case, 25 percent below the rate of increase expected for transportation oil use. Hence, the importance of transportation in oil markets grows, reaching a 51-percent share by 2020 (up from 42 percent in 1996 and 35 percent in 1980). Regional differences are expected to continue, but projected higher demand for transportation services throughout most of the world causes an increase in the transportation share of oil use. An exception is the EE/FSU region, where expected growth in oil use for industrial and building sector energy services almost matches the growth in transportation energy use. Fuel Mix and Modal Trends Petroleum products continue to dominate transportation energy use, maintaining a nearly constant 95-percent world market share throughout the forecast. The major petroleum products used in the transportation sector worldwide are motor gasoline, diesel fuel, and jet fuel. Patterns of fuel consumption in the transportation sector vary widely from country to country. For instance, in the United States, gasoline is the dominant petroleum product used to fuel the country's personal-use motor vehicle fleet, whereas in many Western European countries-where gasoline is heavily taxed-diesel fuel use predominates. Indeed, the diesel car share of new car sales in Western Europe grew from 14 percent in 1990 to 22 percent in 1996 [6, p. 13], and IEO99 projects that European reliance on diesel for road use will remain high, increasing from 46 percent in 1996 to 51 percent in 2020. In India, diesel fuel use also dominates transportation energy use, but this is attributed to a high reliance on freight travel rather than a penetration of diesel-fueled passenger cars [2, p. 86]. In addition, India's aging coal locomotives are increasingly being replaced by diesel and electric engines with the result that the country's dependence on coal as a transportation fuel declines in the forecast. Concerns about limiting greenhouse gases add another level of uncertainty to the projections. In the United States and Western Europe there is some debate as to whether stronger penetration of diesel-fueled vehicles should be encouraged as a means of reducing carbon emissions. The U.S. Environmental Protection Agency is expected to finalize its "Tier 2 standards" in 1999, which will require further reductions in emissions of hydrocarbons, carbon monoxide, nitrogen oxides, and particulate matter from light-duty vehicles (passenger cars and light-duty trucks, including sport utility vehicles, minivans, and pickup trucks) beginning with the 2004 model year [7]. Penetration of advanced diesel technology, including a direct injection diesel technology with 50 percent higher fuel efficiency than an equivalent conventional gasoline engine, might reduce carbon emissions by as much as 13 million metric tons in 2020 [8, pp. 1 and 6]. Advanced diesel technology, however, is not a perfect solution to the problem of reducing greenhouse gases. Although the technology is more efficient and could, as a result, reduce carbon emissions, it may also cause unacceptable increases in emissions of nitrogen oxides and particulate matter. The European Union is also enacting tighter standards on car emissions that might influence future trends in road energy use in Western Europe. The "Euro-III" and "Euro-IV" standards are designed to achieve "costeffective reductions in emissions through controls on a variety of vehicle types and on fuel quality" [9]. Euro-III standards take effect for new car models in 2000 and for existing cars in 2001; Euro-IV standards will be applied in 2005 and 2006. Many European countries also require motor vehicle owners to pay a vehicle excise tax to encourage people to buy smaller, cleaner cars. In addition, the high motor gasoline taxes levied on European consumers and, to a lesser extent, the fuel efficiency advantages of diesel vehicles have encouraged drivers to rely increasingly on diesel automobiles. |