Diesel Becoming a More Economical Option

After hitting a high of $4.84/gal. this summer, diesel prices are in a swoon–and consumers looking to embrace a cleaner, more fuel-efficient engine should give them a second look.

First some history:
This country is more than a decade behind Europe in embracing Diesel engines as more fuel efficient alternatives to conventional gasoline engines. They offer 30-40% better fuel economy, longer engine life, and fantastic low-end torque–for a very dynamic and cost-effective driving experience.

Unfortunately, GM’s diesel experience in the late 70’s and early 80’s managed to sour most of the American car-buying public on diesels and domestic auto companies were unwilling to invest and re- educate in the new clean diesel technology.

If you check the EPA top fuel economy list, VW’s diesels are perennial favorites. Mercedes is re- introducing diesels to the U.S. market with its new Bluetech lineup of clean diesel engines. Even the domestics, under intense pressure to cut their Corporate Average Fuel Economy number to meet new, tougher standards have made announcements about new diesel power-trains planned for the future.

But re-emergence has been scuttled by skyrocketing prices for diesel at the pump. Traditionally, diesel falls below gasoline in the summer months, and rises when demand for heating oil increases. The increased pump price has largely canceled out whatever cost savings greater fuel efficiency was offering. Even if the price were marginally lower, consumers would balk, unable to leap the psychological barrier of paying a higher pump price, even if it offered better mileage.

Now comes word Valero and Total are both boosting output of diesel fuel and investing $6 Billion in new capacity. At the same time, the recessions is killing demand for diesel and forecasters believe the price will fall below the price of gasoline sometime this spring. Bloomberg reports the New York Harbor price is only 14 cents above gasoline falling sharp declines in diesel prices and modest increases in gasoline.

J.D. Power predicts diesel market penetration will increase from today’s 3% to 9% by 2015. That’s a far cry from Europe’s diesel market share of 53%.

BMW is joining the diesel rebound with a new 3 series sedan that gets 23/36 mpg powered by a turbo- diesel. But the champion in the segment is the VW Jetta TDI (See Dan’s comment to our previous blog). The Jetta has nearly a 600 mile range with city mileage at 30 mpg, 41 mpg on the highway manual transmission).

Again, these are not the smelly, knockety-knock, diesels you remember. They are quiet, clean and offer a great return on investment.

Even if you’d never consider driving one. Most of what you eat, wear, and otherwise consume, is probably delivered by diesel-powered trucks or rail, and the drop in diesel prices should ease upward pressure on the prices of all consumer goods. That alone is reason enough to rejoice.