Not so many years ago, the future for light-duty dieselpowered vehicles in North America looked bright. Diesel fuel enjoyed two big advantages Diesel
over gasoline: it delivered more energy per gallon, and was less expensive. Plus, diesel technology had made great strides in rivaling or exceeding gasoline engines in smoothness, performance and drivability. In Europe, diesel soared to a 50 percent market share.
It sounded like a winner for North America too, especially with tougher CAFE standards on the way. Several OEMs paraded advanced European diesel technology as an easy and cost-effective solution to the U.S. fuel-economy challenges everybody knew were coming. But as 2008 winds down, there are few diesel options in U.S. showrooms or in the product pipeline, and the few available are from European OEMs. What happened?
Emissions and Fuel - A Double Whammy
Several factors changed the picture - some anticipated, some not. The tough new U.S. Tier II, Bin 5 emissions regulations proved to be difficult and expensive to meet. Complex emissions aftertreatment equipment added another $1,500 to the $1,000 extra cost of designing and producing a diesel engine
.
At the same time, new U.S. requirements for ultra-low-sulfur diesel fuel drove up refinery costs and pump prices, reversing diesel's traditional price advantage. So far this year, retail diesel prices have been averaging around 60 cents per gallon more than gasoline. In addition, global diesel fuel demand has risen substantially and refinery capacity is strained, keeping prices up and supplies tight. All these factors have conspired to stretch out the projected "payback" period for the higher initial cost of a diesel-powered vehicle.
It does not appear that the diesel-to-gas price imbalance will change in the near term. The ratio of gasoline to diesel fuel refined from a barrel of oil can't be varied by more than 5 percent. Europe burns more diesel fuel than gasoline, but it's the reverse in the United States As a result, the U.S. imports excess gasoline from Europe and exports diesel fuel to Europe. In addition, there is significant new global competition for fuel from other transportation sectors, such as rail, shipping, aviation, highway trucks and on/offroad equipment as economies expand in emerging countries.
Costly Changeover
Another major factor working against diesel in the United States is existing investments in the manufacturing infrastructure. An analysis by CSM two years ago showed that it would take 12 new diesel engine plants - at an estimated cost of $500 million per plant, or $6 billion total - to supply a 20 percent market penetration for diesel in North America. Considering the current financial situation of the North American automakers, an investment of this magnitude is not likely.
Furthermore, advances in gasoline engine technology may soon cost diesel its efficiency advantage. Direct injection/downsized/ turbocharged engines and HCCI, a compressionignition gasoline technology, promise neardiesel efficiency for substantially lower cost.
Legislative Storm Clouds
Although diesel works well as a solution for compliance with current CAFE regulations, legislation that will not favor diesel could be on the horizon soon. Support is mounting for a Low Carbon Fuels Standard (LCS), which would establish a carbon cap on fuel or a minimum blending mandate (e.g., E1, E5, E10 for ethanol-gasoline blends; B5, B10, etc. for biodiesel).
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