“From a fuel-efficiency point, trucks deliver over 140 times the cargo as a car, but they do that while only burning about 3.5 times the amount of fuel. That would appear to be a notable achievement.”
“The trucking industry is already harnessed with the increased operating costs from new highway safety rules reducing the number of hours drivers can work each day and in a week. Increased capital investment costs will further squeeze trucking company profitability…. [P]repare for higher costs of all those products you purchase.”
The Obama administration’s Environmental Protection Administration (EPA) has proposed regulations to reduce greenhouse gas emissions from heavy-duty trucks, requiring that their fuel economy increase up to 40 percent by 2027 compared to baseline 2010 actuals. This is the next step in heavy-duty vehicle fuel economy efforts begun in 2011.
Based on 2013 preliminary data, the latest available from the Energy Information Administration (EIA), tractor-trailers averaged 6.4 miles per gallon (mpg). It is projected that for heavy-duty trucks to achieve the carbon emissions reduction, they will need to boost their fuel rating to close to 9 mpg.
Heavy-duty trucks have become a target of the EPA, environmentalists, and the Obama administration because they are estimated now to account for a quarter of all greenhouse gas emissions from vehicles in the United States, even though they reportedly only represent 4 percent of traffic. This greenhouse gas emissions reduction effort is part of the Obama administration’s goal of being credible on climate change when the Paris conference opens at the end of November.
Cost Increases: 8–9 percent
A big question is how this target, assuming it becomes a part of the final rule, can be achieved and what will be the cost of the effort. Estimates are that the fuel-economy push will add $12,000 to $14,000 to the manufacturing cost of a new tractor-trailer. New tractors can cost $130,000 to $180,000 while the trailer can cost anywhere from $30,000 to $80,000.
That means new tractor-trailer units can cost $160,000 to $260,000, or more. If we assume the cost of the new technologies for boosting mpg ratings is assigned to the tractor, it means cost increases of anywhere from 8% to 9%.
Many of the suggested fuel-saving steps have already been adopted by major trucking operators and truck manufacturers. Those include low-resistance tires, wind deflectors, wind skirts and engine governors. That means the efforts will more likely have to address the tractor engine and transmission, suggesting that the final cost estimates may be understated. As expected, the EPA claims that the increased vehicle costs will be recouped over the first 18 months by fuel savings.
Exhibit 28. Truck Fuel Performance Outstanding vs. Cars Source: EIA, PPHB
Between 1970 and 2013, heavy-duty trucks increased their fuel performance by 16%, increasing it from 5.5 mpg to 6.4 mpg. This improvement has come as the average mileage driven by these trucks has increased by 139% from 10,851 miles to 25,952 miles per year. At the same time, light-duty vehicles (cars and SUVs) have improved their fuel efficiency from 13.5 mpg to 23.4 mpg, or a 73% improvement.
However, average annual vehicle-miles-driven by light-duty vehicles have increased only by 13%, going from 9,989 to 11,244 miles. On the surface, one would argue that it is time for trucks to increase their fuel performance and to reduce their carbon emissions. The greatest gains in truck emissions reductions have come in the area of nitrous-oxide and particulate (soot) emissions where the reductions have been over 98%. No longer do you see those trucks belching clouds of black smoke on the highways.
Realistic?
Can truck fuel-efficiency be increased as much as being proposed? The improvement in light-duty vehicle fuel-use has been achieved by reducing the weight of cars. Trucks may not offer such an opportunity. Additionally, cars carry on average two passengers, so a vehicle weighing 3,000 pounds is hauling 350 pounds of “cargo.”
On the other hand, a fully-loaded 80,000 pound tractor-trailer will be hauling 50,000 pounds of cargo. That is the same weight today as that truck hauled in 1970. From a fuel-efficiency point, trucks deliver over 140 times the cargo as a car, but they do that while burning only about 3.5 times the amount of fuel. That would appear to be a notable achievement.
The increased fuel economy performance by the trucking industry was achieved on its own in response to efforts to improve operating results. The trucking industry is already harnessed with the increased operating costs from new highway safety rules reducing the number of hours drivers can work each day and in a week.
Conclusion
Increased capital investment costs will further squeeze trucking company profitability, causing freight rates to rise and harming the economy. Don’t hold your breath for any relief on these proposed rules – just prepare for higher costs of all those products you purchase.