High Oil Price, the Transport System and the European Economy: Some Results from a Model-based Analysis



High Oil Price, the Transport System and the European Economy: Some Results from a Model-based Analysis

Authors

D Fiorello, A Martino, F Fermi, TRT Trasporti e Territorio, IT; B Schade, T Wiesenthal, JRC IPTS, DE; W Schade, ISI Fraunhofer, DE

Description

The paper introduces the results of the simulation of alternative scenarios using the System Dynamics models POLES and ASTRA. Scenarios assume high oil price and different level of investments in technology development and taxation of transport fuels

Abstract

The fast growth of the oil price is more and more seen as a structural element rather than just a short-term phenomenon. Expanding oil supply is more and more problematic and, even assuming the availability of new resources, their exploitation requires massive investments. On the other side, oil demand is significantly growing in countries like China and India. Given their size and their current level of consumption and economic activity, such countries could easily sustain oil demand for a long future. A pressure is therefore exerted on oil price both on the supply and on the demand side.
If fossil fuels become significantly more expansive, what impacts can be expected in the transport sector and in the whole European economy? This question is addressed in the HOP! project, co-funded by the European Commission DG Research. The study is based on an integrated system dynamics modelling approach that combines the worldwide energy supply model POLES and the ASTRA model, developed in the last decade as a strategic tool for the analysis of the interaction between transport, economy and environment. Through the interaction between the two models, the contribution of the European transport sector on the global demand of energy is considered in detail, whilst at the same time the energy market conditions influence the evolution of transport demand. Several relationships link the transport sector to the economy ? the role of consumptions and investments, the revenues from transport taxes, the contribution of the transport to the productivity ? so that modifications on the transport side impact on the economic development.
The paper introduces the outcomes of the modelling simulation carried out in HOP!. Several alternative scenarios are compared to a baseline scenario of moderate oil growth. Alternative scenarios share the assumption of a sharp rise of fossil fuel price and differ for the availability of alternative energy sources, depending on the size of the investments and the technology development. Biofuels and hydrogen are explored as alternative innovative fuels while another relevant technological alternative taken into account is the improvement of the energy efficiency of conventional vehicles. Scenarios do not focus on transport policy measures, but the taxation of transport fossil fuel is considered given the relevance of fuel excises on the user price and of the related revenues for the national public budget. The role of fuel taxes is explored both in terms of strengthen the incentive to reduce fuel demand (high taxes) and in terms of smoothing the impact of oil price growth on user fuel price. The main objective of HOP! is to assess the impacts on the economy and the employment in EU, but the modelling simulation allow to analyse a wide range of transport related indicators, such as transport performance, mode split, fuel consumption, vehicle fleet size and composition, market penetration of innovative cars and others. Environmental effects are also computed (CO2 emissions as well as local pollutant emissions). Finally, energy statistics like the share of renewable sources or the import dependency are also produced. The time horizon of the assessment is 2050.

Publisher

Association for European Transport