Low Oil Prices Blunt the Drive for Fuel Efficiency



Fuel usage could be reduced or made efficient by increasing the cost of the fuel.  Lost cost of fuel reduces the efficiency.  Statistics of the last two years show 60 percent decline in the cost of fuel drastically increased the oil demand.  But increasing the price of oil may disturb heavy transportation vehicles such as aircraft, ships, trains, trucks and cars which mostly use crude oil.

This Strategy lead transportation industry to take up “slow steaming” practice.  Oil consumption is inversely proportional to the oil cost.  Shipping lines were prepared to absorb higher capital costs in order to save on the running cost of fuel.

Even airlines instructed aircraft to fly slightly slower to save on fuel, reducing the amount of unnecessary fuel, water and other items carried on board.  Reduction of ultra-long non-stop routes will help to save fuel.

Nowadays, due to the reduced fuel cost, people’s focus has shifted from fuel efficiency to speed, power and convenience.

Improvement in fuel efficiency is needed to save fuel in the long run.  United States is improving fuel efficiency of both cars and light trucks such as crossover utility vehicles.  A drop in the fuel prices has made people to opt for bigger vehicles and reduce the use of smaller vehicles, like cars.  Thus fuel economy standards are able to deliver only half to two-thirds of the anticipated reduction in fuel consumption.

Cheap fuel is also helping stimulate a surge in delivery services and has made possible the focus on super-fast home deliveries.  Online shopping sector has relatively improved.  Some online shopping portals are investing heavily in building up its own air freight capacity to meet surging demand for deliveries within 24 to 48 hours.

Current and expected fuel prices influence millions of decisions about transport equipment purchases and operations from cars and trucks to ships and aircraft.  Individually, none of these decisions are large enough to affect the oil market, but collectively they have a big impact on oil demand over time.  Capital expenditure and operating decisions will continue to raise demand for oil until prices rise again.

Source: Reuters


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