Oil Market Report September, 2018

Even the most apathetic observer of life would have to admit that the global oil trade can be both fascinating and exciting. Deep sea oil tankers that are 4 times longer than a football pitch and powered by 100,000 horsepower engines. Pipelines that span national borders – long since closed to human movement. Refineries that work 24 hours a day, 365 days of the year and literally produce hundreds of consumer products. And then there is the monitoring of emissions from diesel engines..? Hold-on, diesel emissions?! That’s hardly very exciting! Having said that though, such is the current public frenzy around all things diesel, that this particular subject has become one of the main talking points of the whole oil industry.

Rightly or wrongly, diesel is now seen as “Enemy No 1” when it comes to air quality and much of this sentiment can be attributed to the VW Dieselgate scandal. But the knock on effects are now being felt by all commercial vehicle operators, as city after city introduces Low Emissions Zones (LEZ’s). Many have concluded that LEZ’s are simply the first step in banning diesel entirely within built-up areas and such developments must be dispiriting for those automotive scientists who have put so much effort into improving diesel engines over the last 25 years.

The first significant improvements to diesel emissions came in 1992, with the introduction of Euro I engine technology. The main focus of Euro I (which was for trucks and buses only) was a reduction in the emission of sulphur oxides (SOx), that was to coincide with the introduction of lower sulphur fuels. This was to combat acid rain, which was the European “bête noire” of the time and was busily destroying Scandinavian pine forests. There were also other Euro I air quality targets – for unburnt hydrocarbons, particulate matter, Nitrous Oxide (NOx) and Carbon Monoxide (CO). Interestingly there were no initial targets for Carbon Dioxide, as in those early days of the 1990’s, the concept of climate change was still confined to a few select university laboratories and lecture halls.

It’s fair to say that the early targets were not particularly onerous, but they did start a trend which placed the responsibility for air quality directly on the engine and fuel manufacturers. Every few years, the targets set by the EU became ever more stringent (Euro II in 1996, Euro III in 1999), until the ultimate emissions “game-changer” in 2005, when Euro IV engines were mandated. By this time, sulphur free fuels had effectively dealt with acid rain, which left NOx emissions as the major remaining concern. Euro IV addressed this by introducing for the first time a requirement for Selective Catalytic Reduction (SCR).

SCR technology relies on the addition of a liquid reducing agent, which when sprayed over exhaust emissions releases ammonia – the catalyst that breaks down NOx into nitrogen, oxygen and water. The liquid reducing agent in question was a urea and de-ionised water compound, invented by scientists at the German Automobile Association and called AdBlue© (despite the fact that the product is clear and not blue at all). This simple product has affected its own mini revolution when it comes to diesel emissions, because by the time of Euro V engines (2009), every new commercial vehicle in Europe had to run with AdBlue©. Furthermore, this was not some “nice to have”, airy-fairy requirement that was impossible to police and easy to get around. Far from it! Without AdBlue©, the engines of trucks and buses literally wouldn’t start. And if the AdBlue© supply was to run-out when vehicles were out on the road, engines would progressively lose power until the AdBlue© supply was topped up.

By the time Euro VI engines were introduced (2013), the immense impact of SCR technology and AdBlue© was clear. For example, a single Euro I bus in 1993 emitted the same amount of NOx as 20(!) Euro VI buses in 2018. On particulate matter, the Euro VI to Euro I ratio is 1:36 (ie, Euro I vehicles emitted 36 times the particulate matter of Euro VI vehicles). Even the improvements between Euro V and Euro VI engines are enormous, with a Euro V engine emitting circa 4.5 grams of NOx per kilometre driven, versus an incredible 0.25 grams for a corresponding Euro VI engine. And it goes without saying that when it comes to passenger transport, buses beat cars hands down. A Euro VI bus emits 0.61mg of NOx per km per passenger, whereas a Euro 6 car engine emits 100mg per km per passenger!

But tackling car owners is a whole different political ballgame, so expect municipal authorities to continue hammering the truck and bus industries with increasingly stringent targets on emissions. For most cities, clean local air is far more pressing than the wider global issue of climate change and this means that for all the recent improvements to fuel quality and engine technology, it will probably not be enough to save the diesel engine within city limits. Not only has total electrification of urban areas already begun (Chinese cities add 2,000 electric buses to municipal transport operations every week!), but it will likely accelerate because however clean diesel has become, it will never perform as well as electric cars when it comes to local air quality. Plus of course, electrification deals a mortal blow to air quality “Enemy No 1” and as such, is a sure-fire way to win political goodwill. But if diesel’s days in the city are numbered and electrification is to take its place, then some pretty hard questions now need to be asked as to how all this electricity will be produced, where it is to be produced and whether it will actually result in an overall reduction in emissions versus the current crop of clean diesel engines…