Diesel is the lifeblood of the trucking industry, a familiar refrain to economists, forecasters, and those behind the wheel. What does 2023 have in store for equipment, fuel prices, and policy?
Investments in new tractor-trailer size (Class 8) heavy-duty trucks outfitted with advanced diesel engines hit record numbers by the end of last year. ACT Research, recently reported that the number of new Class 8 heavy-duty truck builds in 2022 was 316,400 vehicles, up 19.6% from 2021 levels. This number beat earlier forecasts. Our most recent data suggests that 97% of these units were outfitted with advanced diesel engines, with natural gas engines making up most of the balance of sales.
This is good news for truck makers, the environment, and for truckers. A 2022 heavy-duty diesel truck replacing one built in 2010 has 98% fewer emissions of particulates and nitrogen oxides. It’s more fuel efficient, too. Accelerating the turnover of the oldest trucks is key to sustaining progress on clean air and climate objectives.
More than 300,000 Class 8 units built last year is a significant accomplishment, especially considering the lingering supply chain issues that have driven down sales of consumer-size vehicles in the same period. For comparison, about 14 million new passenger cars and light trucks were sold last year. It’s also a function of the need to replace aging equipment after down cycles of investment over the last two years during the peak of the pandemic. Tractor-trailer sized rigs cost an average of about $120,000, and they run 100,000 to 120,000 miles a year. New trucks can easily rack up a million miles before needing an engine overhaul. So, the 300,000+ new rigs on the road today will still be serving our demand for goods over the next decade and beyond.
For 2023, recessionary concerns reverberating through the economy could drive lower freight demand and slow investment in new trucks. ACT Research’s early forecast for 2023 will remain over 300,000 units, but be just under 2022 numbers.
Manufacturers are also working to bring zero emission vehicles to market, to meet California’s Advanced Clean Truck Rule requirements and customer demands, particularly those looking to take advantage of the $40,000 per truck tax credit and $100,000 credit for new fueling facilities for zero emissions vehicles. Right now, it’s a large carrot for truckers to consider zero emission vehicles, but it’s hard to know when those incentive carrots will be ready to harvest.
Other than a bona-fide economic recession, diesel prices are the wildcard this year for trucking. More global turbulence is on the horizon to start the year as Europe will enact a ban on imports of Russian oil products in February. This is significant since Russian imports supply Europe with 29% of its diesel fuel. More than 90% of European trucks and vans are powered by diesel, as are 42% of passenger vehicles. Analyst Wood Mackenzie predicts a global price surge in February when the restrictions take effect, as Europe seeks to procure adequate supplies.
For its part the U.S. Energy Information Administration suggests that diesel prices will decline from earlier predictions from $4.48 to $4.22/gallon in 2023, while inventories of diesel fuel will increase about 2.5% from previous forecasts to 127 million barrels.
More renewable diesel and biodiesel fuels that deliver immediate greenhouse gas reductions on the order of 50 to 85% depending on feedstocks, will find their way into heavy-duty truck engines in 2023 as refiners boost production of these fuels to meet state and regional low carbon fuel standards and national fleet demand. All heavy-duty diesel engine manufacturers approve biodiesel fuels in a 20% blend with petroleum diesel. Renewable diesel fuel is approved for use in heavy-duty truck engines up to 100%.
There’s plenty of truck engine, emissions, and fuel policy impacting the industry this year. The ink is barely dry on EPA’s newly enacted 1,150-page final rule setting the stage for the next chapter of advanced diesel engines. EPA’s new requirement takes effect in 2027, and when implemented four years from now these new standards will reduce nitrogen oxide emissions an additional 85% (0.03, down from 0.20) from current levels that are already near zero. Manufacturers must also boost the durability of emissions control systems and the warrantable periods for achieving emissions standards by more than two times the current requirement. We’ll know more about the challenges to meet all the details of this rule in the coming months.
In March, the third phase of the greenhouse gas rules is expected to be proposed by the EPA and the U.S. Department of Transportation. And more state activity is on the horizon in the northeast as New York holds a hearing within weeks on adoption of California’s more stringent nitrogen oxide emissions standards for heavy-duty trucks. Other states are also considering these California standards that add additional cost and complexity for manufacturers and higher costs and fewer choices for truckers.