Fuel Prices Killing Diesel Comeback
Some auto industry analysts believe diesel vehicles will become more popular than hybrids in the next decade—but high diesel fuel prices could radically change those forecasts. This week, the average price of a gallon of ultra-low sulfur diesel is a dizzying $4.50 a gallon, compared with gasoline at $3.84.
Despite the fact that diesel vehicles achieve better fuel economy than conventional cars, and are roughly equal to hybrids in efficiency, the premium for diesel fuel—currently 66 cents a gallon compared to regular gasoline—could dissuade new car buyers from adopting diesels.
Higher energy prices affect the cost of diesel differently than gasoline. While supplies of diesel and gasoline are nearly equal, demand for diesel has grown at a faster rate. John Felmy, chief economist of the American Petroleum Institute, an industry trade association, testifying before Congress, said, “Over the past five years, U.S. demand for highway diesel has been rising at triple the rate of gasoline.”
Diesels and gas-electric hybrids each represent about 3 percent of today’s new car market. J.D. Power predicts that diesel will rise to 11.5 percent by 2015, while hybrids will plateau at 7 percent. Mercedes, Volkswagen, Chrysler and other makers of so-called “clean diesel” vehicles, which are expected to arrive in car showrooms later this year, are counting on this forecast to come true. But there’s mounting evidence that diesel adoption, especially in Europe, will remain flat or decline.