Do High Diesel Prices, Or Consumer "Hostilities," Keep 65 Mile-Per-Gallon Sedans Off The US Market?

Given that most diesel fuel is consumed by commercial vehicles, the political risk of selling diesel at a higher price in the USA is low: there are just not enough truck driver voters to make a huge difference. That would not be the case if millions of average income (read this as non-Mercedes owning if you like) Americans relied heavily on diesel fuel for daily transportation.

There may not be too many commercial driver votes, but there is a big, very powerful organization called "The Teamsters" that might be on the minds of any politicians looking to do anything that affects the price of diesel.

Just a thought.

The claim of 'consumer hostility' is reminiscent of Detroit car-maker logic regarding the continued manufacture of gas-guzzling SUVs in the face of a fuel price crisis: 'we make what American consumers want,...blah blah.'

Their logic was sound: American's did want to buy larger automobiles; they only started going for smaller cars when gas prices went up. The Detroit Three are now shifting gears because demand has shifted, and if they survive in the short-term, I'm sure they will bring out some reasonable products.

Perhaps Detroit should have hedged their bets a bit more, but that's lack of foresight more than anything else.

Also, while higher efficiency is better than lower efficiency (ceteris paribus), you eventually get to a point of diminishing returns:

http://tinyurl.com/6ajwux
http://www.stantonchampion.com/2008/07/08/better-gas-mileage-both-blessing-curse/

Also, diesel is more expensive than gas, and that's probably why fewer people use it. Here in Canada the price is roughly the same (things fluctuate between cheaper/same/more expensive). If you drop the price of diesel in the US so it's closer to the price of gas people will go over in droves.

People aren't switching to more efficient cars for airy-fairy notions like "saving the planet", they're switching so their bank accounts will survive.

The "greens" need to realize their PR isn't as effective as it could be. They should be teaching that helping yourself helps us all.

Hostile to Diesel? Bologna. I test drove the VW Passat TDI (diesel) the other day and the dealer said there is a 8 month waiting list for delivery of the wagon version. Doesn't sound very hostile to me. Detroit just doesn't get it and the free market should just let them fail, stop these stupid govt bailouts of our corporations that can't compete and operate efficiently.

Thank you for attempting to sort out this issue that's getting really irritating. I have a couple of additional thoughts.
Nuclear power is the only industry I can think of that spends more time concealing and obfuscating the truth than car makers. Particularly the American brands. They've been saying they make the cars that Americans want. Ok, why is it that they're losing money like crazy year after year? A major part of it is low sales figures. A conclusion you can draw from that is: if you do not sell enough cars when compared to your competition, you in fact do not make the cars America wants. Then they also spend billions of dollars on advertising to try to make people want the cars that they make. Then when they make something that people want right now, an SUV with good gas mileage--the Ford Escape Hybrid and equivalents, they don't advertise it.
So I think one of the problems here is that they spend billions of dollars to tell Americans that they want huge, powerful, expensive, inefficient cars with tons of unnecessary features. Around here, they have no clue how to market cars any other way and they never try. I think that's a critical part of this whole thing. The closest they've come is making absurd claims about how 29mpg highway is extremely fuel efficient. Maybe people really do want huge, powerful cars, but they end up buying the car that they *need*--which is increasingly becoming something more practical and efficient.
This "nobody want diesels" fiasco sounds a lot like what we heard with hybrids. Nobody wants them. Try to drive around any city in America without seeing them--people everywhere driving cars that nobody wants.
Is anyone else exasperated with automotive journalists and news programs?
Reporters covering most industries are sycophantic at least once in awhile and understandably so, but mainstream automotive journalists strike me as the most servile and brainless of the bunch--and often proud of it. The attitude towards hybrids is my main gripe at present. Somehow they've construed hybrids as wasteful and inefficient, and anyone who drives one is smug. Somehow hordes of homicidal teenagers driving Mustangs and middle aged men with car loans the size of mortgages who sneer at subcompacts all get a free pass, but someone trying to save some money and do less damage to the world while doing it is smug. If it's not big and overpowered they don't understand it. I guess my point is that I feel more and more that this sort of coverage of the industry is complicit ruling out a more sensible attitude toward vehicles both within the industry and nationally.
As for those who make the fuel we use, try to find keep your eye on the news. Fuel prices here in the midwest were the highest in the country for a few years because the oil refining companies refused to build new refineries. Then they refused to expand their existing facilities. On both accounts they demanded more tax breaks and pollution exemptions. This sort of extortion seems to be common. Please don't be silly and suggest that new facilities, increased capacities and pollution controls are legitimate financial obstacles to businesses that regularly post well over $10 billion quarterly *profits*. The American people heavily subsidize their operations and allow them to operate their businesses using our environmental resources, and so long as we do we have a right to tell them what to do.

Diesel fuel is chemically very similar to jet fuel and kerosene. I haven't seen a huge increase in kerosene lamps, so maybe the increase in fuel cost is due to diversion to military jet aircraft? Even some military ships use turbine engines for propulsion.
Or, the auto companies do not offer diesel cars here because they don't have to. Does the euro-spec Fiesta cost a few more dollars to make? According to John Delorean, GM continued production of a faulty suspension design in the Corvair because of modest cost per unit to retool the factory.
Maybe I'll commission M. Knight Shyamalan to produce a movie called "I See Conspiracies."

As to Ford: there is a word for this... Traitor!! I thought Ford was an American company? They say that American automakers sales figures are down... Well? If they would come back to America and sell to Americans their history might change... overnight?? That is all I have to say.

I'm a new driver and information like this is a good source an I could keep my mind open to when I get a new car. I don't know much about diesel, so I'm going to look it up and get more information about, because we all the price for gasoline is rediculous.

Two comments come to mind that have not been touched upon:

Older Americans remember the fiasco with diesels in the 1980's when GM tried to convert gasoline engines to diesels and ended up with 30,000 mile engines. They were noisy, smelly, smoked like mad and died a premature death.

A refinery is designed for a specific blend of products and, once built, is pretty inflexible. The European refineries were built with a target gasoline to diesel ratio which was appropriate at the time they were built. Europe has largely converted to diesel which then leaves them with excess gasoline production. Much of this excess production is sold at discount and shipped to the US.

Bill

Well my wife and I own a diesel, VW Jetta TDI, it gets great milage on the highway and soso in town but overall it's a great car. We buy biodiesel fuel and I love the fact we are not sending money to the middle east, it does have issues though. With the research in different feedstocks for bio rapidly producing results I think the problems with bio will diminish within the next several years. Right now the cost of bio here in LA is $5.15 and petrolium diesel is around $4.50 or so. In the past year I have purchased only 2 tanks of petolium diesel and average 1 tank of bio every 1.5-2 weeks. I would purchase the Ford Escort diesel right now if I could but since Ford has no clue on how to market cars I have to wait for something else, most likely from Japan or another VW. It's no wonder American car companies are going bust!

Cheers
Robert C. Fisher

I agree with Scott above. People are paying $1,000 a crack to get on a waiting list for the diesel VW Jetta and Jetta Wagon.

That's hostility?

Either Ford simply doesn't get it... or as the article states, there's more to it than meets the eye....

Personally I don't think Ford buyers and VW buyers are the same demographic, but that's just me.

There are other issues for why diesel never picked up in the US, including much stricter emissions standards (making difficult and expensive to make diesels for US market, sometimes a couple thousand over a gasoline engine), combined with the now higher price for diesel really cuts into the return from higher mileage.

Scott:
The Japanese car companies haven't introduced diesel cars into the US, and the German car companies have only introduced limited numbers of diesel cars into the US, so why the rant?

Hostility.

I deeply and sincerely hope that Phoenix, Zap, Tesla and others bury GM and Ford. I will dance a jig and shoot off firecrackers. I will celebrate yearly on the date that Ford and GM succumb to Phoenix, Zap, and Tesla.

Now THAT is hostility.

And before the free marketers scream "UnAmerican" or "terrorist", I am just hoping for real competition in the marketplace, not this government sanctioned crap that has become such a twisted perversion of a healthy market. A system which gives massive bailouts and preferential legislation to failed business models based upon their most recent contributions to political campaigns.

The EPA's ridiculous regulations have kept diesel's out of the US for years. The American government is at fault here.

=== authors' response follows ===
There is strong clinical and epidemiological evidence that particulate matter emitted by diesel engines causes lung disease and makes the young and elderly suffering from asthma worse. In other words, EPA had medical reasons to require low sulfur diesel and to seek engine performance standards that limited particulate emissions.

Can you please provide a link that substantiates your claim? JL

There's also the possibility that the Fiesta could, in effect, make all of their other cars look bad in comparison.

"But, why does THIS car get 65 MPG and THIS one get 12???"

On the flip side, you'd think this would help them out immensely with the "fleet" 35 MPG CAFE requirements.

Just wanted to try to clarify a few things from the article and some comments.
There is a tremendous political risk to raising the price of diesel. Farmers are extremely sensitive to the price of diesel for one. And just because the majority of diesel is used by the trucks that truck drivers drive, it is pretty silly to assume they are the only ones affected. They don't just absorb the hit, the cost of transportation rises, and the price of pretty much everything follows. I think it's safe to say that most people ("average" or mercedes driving) are against rising prices.
The difference in federal taxes on gasoline and diesel is indeed 6 cents, however the effect that this has on price is a complicated problem. It does necessarily not mean that the "tax associated price differential" is six cents.
Looking at this page,
http://tonto.eia.doe.gov/oog/info/gdu/gasdiesel.asp
for July 2008, refining costs for diesel were $.75/gallon compared to $.12/gallon for gasoline. I think that covers the $.64 difference in price per gallon pretty well. For anyone interested, the EIA site can tell you just about everything you want to know about energy.
Finally, to everyone saying "free market! let them fail" normally I would agree, but there are millions of Americans that depend on jobs at domestic automakers. That is why they will be bailed out if need be.

"Can you please provide a link that substantiates your claim? JL"

-Its well known in the auto industry that the makers of diesel motors didn't want to meet the US's regulations. The Europian standards were tough enough.

Maybe you should provide a link to these "studies" the EPA used...

=== author's response follows ===
The issue I assume you refer to was settled back in April 2003. http://www.warrantyweek.com/archive/ww20030428.html

The medical reasons for the diesel standards are outlined in layman terms here, at the American Lung Assn site: http://www.lungusa.org/site/pp.asp?c=dvLUK9O0E&b=36089

If you would like scientific literature I will take the time to dig it up for you. Otherwise we can move on to the more important topic of what to do about the problem.

BTW, yes Canada has ULSD since 2006

There is a big problem with switching a lot of cars to diesel that no one seems to mentioning!

Crude oil contains so much gasoline, and so much diesel. There is only limited ability to shift this ratio.
Right now, Americans consume more gas because we buy it from Europe, where they consume more diesel. But the ratio is pretty much fixed.

If a million Americans were givin diesel cars tomorrow, no magic diesel would appear to fill their tanks. Rather, they would bid up the price of diesel and correspondingly, the price of gas would fall because 1 million people no longer need it. Guess what, now a million other consumers are going to run out and switch from diesel to gas to take advantage of the price gap.

Diesel was treated pretty bad in the US up until recently. A couple years ago I wanted a diesel but my wife said no as well as everyone else I knew, "higher cost", "smelly", "niosy", etc. Its only very recently that people really consider diesels because every little bit of difference in mileage really makes a big difference in $. Up until a year or two ago there were no wait lists for VW diesels, the dealers almost had to pay people to take them, then the pirce of fuel tripled all of a sudden everyone wants them.

Another obvious knock against diesels: new diesel autos cannot be registered in New York or California, which comprise upwards of a fifth of the U.S. population or approximately the population of Great Britain. I can understand why Ford would be hesitant to create the infrastructure and supply chain for a product that has limited appeal (due to its modest size and power), EPA hurdles and severe market limitations. And when you add to this the negative stereotypes, expensive fuel and cost differentials versus the regular ICE, the case for diesel becomes more and more discouraging.

=== author's response follows ====
If the emissions meet standards, they can be sold even in those states. While this is technologically feasible with existing designs, the makers have not yet done it apparently.

As far as I know, the introduction of European Diesel cars into the US has been significantly hampered by the lack of low-sulfur Diesel oil in the US (this type of diesel is needed to efficiently clean exhaust gases). The sulfur content will continue to be considerably lower in several European countries as compared to the new US standard.

http://en.wikipedia.org/wiki/Ultra-low_sulfur_diesel
http://auto.howstuffworks.com/how-clean-diesel-fuel-works1.htm

Does anybody know the regulations for trucks in the US?

Emissions standards, cheap petrol, and poor execution in the 1970's have kept diesel vehicles off American roads.

CA has extremely tight particulate and NOx emissions standards (yes, much tighter than standards in Europe) that technology can just barely meet today and automakers don't want to sell a vehicle unless they can sell it nationwide.

Until 5 years ago, gas was so cheap that very few people cared about fuel efficiency - and the few environmentally-minded that did care were informed well enough to see that black smoke coming out their exhaust and think better of it.

Lastly, much of mainstream America thinks of the diesels of the 1970s - which were poorly executed in every way.

"People are paying $1,000 a crack to get on a waiting list for the diesel VW Jetta and Jetta Wagon. That's hostility?"

A waiting list for a something available only in limited quantity does not constitute high demand. Again and again I see comments on TH saying that if the US auto makers would make vehicles like VW, they would be making money.

VW-Audi sold 28,698 vehicles in the US last month (gasoline and diesel combined). Compare that to the US auto makers for the same period.

Chrysler - 110,235
Ford - 151,021
GM - 308,817

And VW has been LOSING about $1 billion per year in the US for several years.

This is not strictly a diesel issue - as an example, look at the entire VW/Audi lineup in the US vs Europe. In Europe they have many, many more efficient variants to models sold in the US, gasoline and diesel, as well as smaller more efficient models that aren't available in the US.

The only way to overcome this will be in recognizing that automobiles currently sold in Europe are now every bit as safe and clean as those sold in the US, and to write laws connecting the regulations in the US and EU - this would give consumers in the US the ability to import these vehicles themselves until the dealers begin demanding the manufacturers make them available for sale.

Maybe they say nobody wants diesels, based on the piece of junk diesel cars GM put on the road in the late 1970's after the first gas crisis. The converted gasoline V8 had a problem of breaking its crankshaft. They did not use an engine designed from the beginning to be diesel, so it wasn't worth having. They didn't want to make a real diesel vehicle then, and they don't want them now. Right now they are lobbying to lower the fuel efficiency standard so that they can continue to make the same vehicles they are already making with poor fuel economy. Later on, they will complain that they can't sell them in the overseas markets because of unfair trade policies, ignoring that most people outside this country can't afford to buy a gas hog. They are quick to blame someone else for their problems.

the very first auto maker to sell any diesel car that gets 60-80 mpg has me sold.

detroit has dropped the ball. that's why toyota is #1.

if detroit won't build the cars we want we will go elsewhere.

Comparing the ECOnetic Fiesta to the VW TDI's is "apples and oranges". It is more equivalent to the Polo BlueMotion, which is also not available in the US, and the Golf BlueMotion is also not expected to be sold in the US, so I guess VW "just doesn't get it" either.

Or maybe they do. Currently only about 22% of VW's sold in the US are diesel, and that is with virtually no competition. Given that there were 324,078 VW's and Audis sold in the US in 2007, that's a little over 71,000 in a market of about 15 million, or about half a percent.

Even with the recent increase in interest, VW only expects their diesel sales to increase to 30% in the next 10 years. With that little interest in diesels, it is difficult for anyone to make a business case for bringing them here, especially for smaller cars, which sell at disproportionally low prices compared to their cost to build.

===== author's response follows ====
You make a powerful point. But viscerally I want to attribute the low sales to VW's poor reputation for reliability and service which has been demonstrated (per Consumer Reports) in customer surveys.

If the diesel price were within a few percentage points of gasoline and stayed that way, and if Toyota offered a nice sized domestic sedan with diesel, it would sell like gangbusters.