Fueling Transportation Is Becoming More Complex

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Transportation Is Evolving

Throughout history, the strength of nations, economies, industries, and businesses have been tied to the ability to move people and goods. Until the harnessing of steam, using wood and coal as fuel, modes of transportation were limited to those moved by the power provided by humans, animals, wind, and water. With the harnessing of steam power, ocean going ships became faster and more reliable, and riverboats opened access to inland areas. Steam as a power source brought about a transformative new mode of transportation — the railroad — and suddenly the ability to connect distant regions was enhanced. The continent of North America was tied together by ribbons of steel that created vast new areas for settlement and expanded commercial markets. 

Petroleum based fuels brought an even more significant change to the world of transportation. Steamships transformed into vessels fueled by bunker fuel rather than coal. Railroad locomotives switched from burning wood and coal to diesel electric power. Even more important, petroleum-based fuels helped facilitate the invention of the internal combustion engine, which in turn brought society into the automotive age with the development of automobiles and trucks. Over the last century, airplanes have become commonplace and, of course, are powered by aviation fuels from petroleum. The economic efficiency of petroleum-based fuels in transportation services is undeniable, as evidenced by the fact that all major transportation modes either switched from steam to petroleum-based fuels or technologies were developed to take advantage of such fuels. Moreover, petroleum-based fuels have been the dominant source of energy for all modes of transportation for the past century.

The world of transportation is changing dramatically. The combustion of petroleum-based fuels has driven concerns and concomitant policy measures about local air quality impacts of nitrogen oxides, volatile organic compounds (VOCs), and particulate matter (PM) emissions, all of which negatively impact air quality.[1] Technologies, such as catalytic converters, and improvements in fuel standards and combustion efficiency have helped to lessen, but not eliminate, these concerns. Most recently, mounting concern about CO2 emissions and their impacts on climate change has brought new pressure on government officials and transportation providers to find ways to reduce carbon emissions that emanate from the exhausts of ships, trains, automobiles, trucks, and airplanes.[2] Despite the promise of some of the technology pathways that have been proposed, the future is far from clear because large scale disruptions or significant increases in cost in the transportation system is neither politically or economically advisable.

An Analogy To Highlight Importance

In order to fully grasp the importance of transportation, it must be recognized that the health of an economy is highly dependent on its transportation system. By way of analogy, consider the circulatory system of the human body. A circulatory system in an individual carries oxygen and nutrients to organs and tissues so that they may function efficiently and in coordination to ensure the well-being of the individual. Arteries carry oxygenated blood away from the heart, while veins carry deoxygenated blood back to the heart. A system of organs along the path ensures oxygen and nutrients are loaded into the circulatory system through exchange via capillaries, while CO2 and waste are unloaded from it. Every part of the system works in concert for the overall health of the individual. If the function of any part — from the heart to arteries to veins to capillaries — is inhibited, various degrees of limited body function, or even death, occurs. 

A transportation network is the circulatory system of an economy. If anything disrupts the flow of goods and services to points where they are needed, or waste products away from where they are produced, an economy will not function efficiently, resulting in inevitable disruptions. Hence, the loading and unloading of goods and services in an economy’s transportation system at various points of exchange, as well as the movement of those goods and services along it, must be relatively seamless. Otherwise, the health of the economy suffers. As such, transportation policy — from policy that impacts infrastructure to fuel production and delivery — must tread carefully lest it could damage the economy.[3]

Indeed, we see evidence of policy flexing to recognize potential costs associated with previous actions when presidential and/or congressional actions are taken to mitigate rising fuel costs, even when those same administrations have taken steps to phase out petroleum-based fuels — when fuel efficiency mandates are relaxed, when deadlines extended, and when congestion pricing policies are delayed. Given that we have seen each one of these examples play out over the last four years, it is obvious that policymakers are at least aware of the cost-benefit calculus in policy that impacts the economy’s circulatory system.

Transitions Are Complex

Despite the oft touted adoption of electric vehicles across passenger fleets and commercial fleets that move small freight, cleaner transportation is not as simple as transitioning from petroleum products to electricity.[4] To begin, airplanes cannot be realistically powered by electricity, at least not currently, and handle the same requisite freight and passenger loads. The long-haul trucking industry faces similar difficulties, and has, in fact, pushed back against electrification as being impractical due to the size and weight of batteries, their limited range, and the cost of adoption.[5] Additionally, independent owner-operators and trucking companies are concerned about the costs associated with replacing their current equipment, so they would prefer to find a fuel that allows utilization of existing assets.[6] Likewise, shipowners have expressed reluctance to scrap existing bunker fueled ships for newer, more expensive ships, especially when other fueling options — e.g., biofuels and hydrogen derivatives — for fleets can be made available.[7] 

Hovering over the transition to other fuels for almost every transportation mode is the question of dependability of supply. For the trucking industry, the truck stop industry must be able to adapt to new fuel requirements. For ocean shipping, ports must be able to meet the fuel needs of new ships. Airlines, air cargo carriers and airports need to be on the same page when it comes to aviation fuels. In other words, the adoption equation in transitions in transportation is not only a function of the availability and cost of the new technology but also a function of the cost of the full supply chain needed to support fuel production and delivery to the point of use. 

Going forward, the transportation industry is facing a dilemma. How are environmental concerns addressed while simultaneously maintaining operational efficiency and avoiding unnecessary upward cost shifts for moving goods and people? In answering that question, for the first time in history, modes of transportation may end up going in multiple different directions when it comes to the fuels each mode ultimately chooses. 

In addition to electricity, the transportation industry is researching a wide variety of other fuels as it seeks to reduce the carbon footprint associated with using traditional petroleum-based fuels. Sustainable biofuels sourced from cooking oils, animal fats, and agriculture products, as well as hydrogen, methanol, ammonia, and various e-fuels are among the options being tested. Some ocean carriers are already ordering ships powered by liquefied natural gas (LNG), bio/e-methanol, bio/e-methane, ammonia, and hydrogen. Airlines are already using sustainable aviation fuel as a supplement to basic aviation fuel. Railroads are testing hydrogen locomotives. The trucking industry is decarbonizing local delivery — i.e., the last mile — by using vehicles powered by electricity, compressed natural gas (CNG), and sustainable diesel. Long-haul trucking companies are considering sustainable diesel as a drop-in fuel for existing equipment, and fuel suppliers are researching new engines fueled by hydrogen and other alternative fuels.

What To Watch

There are many questions to be answered about transportation fuels of the future: 

• How much of each fuel can realistically be produced in quantities sufficient to become the fuel of choice for a segment of the transportation industry? 
• What is the supply chain needed to support each fuel option, and what changes to the delivery infrastructure must be made? 
• How will each mode of transportation choose the best fuel, and will there be a commonality of use within each mode? 
• For those fuels that can serve multiple transportation modes, will there be enough for competing modes? 
• What role will governments play in deciding the fuels of the future, and will they avoid the temptation to dictate a monolithic answer for each mode? 
• Will the fuels marketplace be driven by the transport providers or by the fuel suppliers? 
• What role will original equipment manufacturers play in the choice of fuels for each transportation mode? 
• Will there be geographic differences in fuel used by various modes? 
• What is the time frame for the transition to new fuels for each mode?

Regardless of how these questions are answered, there will be a set of trade-offs to consider so that economic well-being is not severely encumbered. This will manifest in different ways through different economic and policy channels directed at freight movement and passenger mobility, and take shape in ports and the airline, trucking and rail industries, as well as across major cities. Moreover, as new fuels become technically viable, their attractiveness will hinge on both the fixed costs of adoption and the marginal cost of use. The future of transportation is uncertain, but it will, as it always has, continue to evolve, although perhaps not in the ways we might expect. In the end, the health of economies everywhere will depend on it.   

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Notes

[1] For a summary of these issues, see Environmental Protection Agency (EPA), “Smog, Soot, and Other Air Pollution from Transportation,” last modified April 25, 2024, https://www.epa.gov/transportation-air-pollution-and-climate-change/smog-soot-and-other-air-pollution-transportation. 

[2] For a discussion of these issues, see EPA, “Carbon Pollution from Transportation,” last modified May 14, 2024, https://www.epa.gov/transportation-air-pollution-and-climate-change/carbon-pollution-transportation. 

[3] Indeed, we see evidence of this when presidential and/or congressional actions are taken to mitigate rising fuel costs, when fuel efficiency mandates are relaxed or deadlines extended, and when congestion pricing policies are delayed.

[4] International Energy Agency, “Trends in Electric Cars,” 2024, https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars. 

[5] Sean McNally, “New Report Pegs Costs of Electrifying U.S. Commercial Truck Fleet at $1 Trillion,” American Trucking Associations, March 19, 2024, https://www.trucking.org/news-insights/new-report-pegs-cost-electrifying-us-commercial-truck-fleet-1-trillion. 

[6] Thomas Wasson, “Trucking Electrification Throttled by Excessive Ownership Costs,” Freight Waves, May 16, 2024, https://www.freightwaves.com/news/trucking-electrification-throttled-by-excessive-ownership-costs. 

[7] Keith Dawe et al., “Future Biofuels for Shipping,” Global Maritime Forum, March 28, 2022, https://www.globalmaritimeforum.org/news/future-biofuels-for-shipping. More recent explorations involve hydrogen-derivative fuels and e-fuels, as opposed to battery electric, see “Maersk Mc-Kinney Moller Center Unveils Ammonia-Fueled Boxship Design,” The Maritime Executive, May 24, 2023, https://maritime-executive.com/article/maersk-mc-kinney-moller-center-unveils-ammonia-fueled-boxship-design. 

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