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Car sales surge in Europe but fuel use down with new tech

LONDON (Reuters) – Surging European car sales will do little to help sagging fuel consumption, and oil refiners’ profits, as drivers opt for more efficient models, analysts say.Europe’s new car sales grew 14.8 percent, their fastest monthly rate in five and a half years in June, boosted by low interest rates and falling unemployment.

Vienna-based JBC Energy forecasts that demand for both gasoline and diesel in Europe will slide every year to 2020 for both gasoline and diesel, and combined demand for fuel from passenger transport will be almost 10 percent lower in 2020 at 2.9 million barrels per day than the 3.2 million bpd for 2015.

Buyers upgrading to more efficient models compounds the problem for refiners.

"Car sales data in Europe mean little for oil demand as these are not first time buyers, it’s someone upgrading, swapping a clunker for something more fuel efficient or switching from diesel to gasoline," said Seth Kleinman, head of energy research at Citigroup.

Improved fuel efficiency has also counterbalanced a renewed interest in bigger sports utility vehicles, given a recent boost by cheaper gasoline.

   In Britain the average new car in 2014 ran at 58.1 miles per gallon (mpg)(4.9 liters per 100km) compared to 43.2 mpg in 2005, a rise of 34 percent according to data from the Society of Motor Manufacturers and Traders.

“While strengthening car sales might partly be reflective of the increasing average age of the European car fleet, the recently experienced switch towards SUVs is unlikely to be strong enough to counterbalance general vehicle efficiency improvements,” David Wech, analyst at JBC said.

"This is also highlighted by the increasing market share of small passenger cars, while SUVs are most likely to compete with larger cars in the medium to upper class segment.”

Analysts also said that after a brief spike following the financial crisis car sales would likely subside again.

"I don’t think demand will be as strong in the next 10 years as it was for the last 10," Theo de Kort, automotive analyst at ABN Amro in Amsterdam said.





Drivers are using their vehicles less, de Tort said.

"The trend reflects a number of changes in society, be it increased reliance on smart phones as the center of social interaction, online shopping, high levels of road congestion incentivizing people to switch to other modes of transportation," said Max Bolhoff, senior consultant at KBC Process Technology.

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