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martin
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« on: February 06, 2010, 06:51:22 PM » |
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from today's Torygraph
"The scrappage scheme has highlighted the benefits of small, cheap petrol engines. We examine the facts behind the predicted demise of diesel.
Nasty oily stuff or thrifty saviour? Until fairly recently, you might have said that UK buyers were coming around to the second view.
In Europe, diesel's share of the new passenger car market has grown from 25 per cent to more than 50 per cent during the past decade, but in Britain, from a lower base, growth has been even faster during the same period (from 15 per cent to 43 and a bit).
In recent months, though, Britain's love affair with diesel has lost its ardour. The latest registration figures show that January-October sales last year dropped by almost 16 per cent compared with 2008, down from 832,200 to 700,131. As a proportion of the total market, diesel has fallen from 43.3 per cent in 2008 to 41.5 per cent last year.
Small percentages, yes, but big numbers. It's a trend that is also replicated in Europe, where during the past 12 months diesel's overall market share has fallen from about 52 per cent to less than 46 per cent. Even in Belgium, which has Europe's largest diesel penetration, market share has dropped by almost four per cent.
So what has happened? Does this change mark the end of diesel's European conquest? There are several contributing factors to what initially appears to be the demise of diesel.
Small petrol engines
According to the official explanation, Britain's scrappage scheme has favoured petrol sales and there is a fair amount of evidence to support this.
The latest figures for UK new-car registrations reveal a rise of 31.6 per cent, the fourth consecutive month of growth, but almost all of this was down to the general public (rather than fleet managers).
To date, most of the 330,000-plus scrappage opportunists have bought small cars – and these tend to have petrol engines because diesels are more expensive and elevate prices to uncompetitive levels.
Diesel also yields smaller economy and durability benefits in a small, lightweight car that tends to do fewer miles than the national average. Simply put, scrappage favours small cars and small cars favour petrol engines.
Price
There's also the price question. Diesel is more expensive in Britain than it is in mainland Europe: that is partly a function of UK tax, partly supply and demand. In fiscal terms the UK Treasury has treated diesel and petrol fairly equally, so diesel does not yield the same big savings and fast paybacks as it does on the continent.
Taxation and additional refining costs increased the gap between petrol and diesel to 10 per cent in 2008, but it has since settled back to parity (or, at most, a few pence).
There are also new EU emissions regulations that mean diesel engines require a load of extra equipment to reduce pollutants such as oxides of nitrogen and particulates.
This is estimated to cost manufacturers as much as £1,000 per car to meet EU VI requirements and they are ill disposed towards absorption of such stipends.
These specification changes also reduce diesels' refinement and render them less reliable.
Honest John regularly carries letters about the failure of dual-mass flywheels on diesel cars, which can cost up to £1,500 to put right.
Turbos, particulate filters, glow plugs, exhaust-gas recirculation valve and injection pump failures are becoming more common, and are often caused in part by wrong fuelling with petrol, which causes long-term unseen damage to diesel engines and their ancillaries.
Supply
Then there's the shortage of supply itself. In a typical 35-gallon barrel of light, sweet crude oil there are about 16 gallons of petrol, 8.5 gallons of diesel, 3.4 gallons of jet fuel and 8.5 gallons of heavy fuel oil, liquefied petroleum gases and other products. However, that's based on American usage.
All these distillates can go through further refining stages to be converted into each other, but it costs money and time.
There was an illustration of diesel supply shortages last year at the point where crude oil hit almost $150 a barrel. Various members of the Opec oil-producing group admitted that they were struggling to sell all their output in this so-called "shortage".
Part of the reason for this apparent anomaly was that most of this Middle Eastern oil was ill suited for diesel production and that's what Europe wanted.
That it also suggested the unprecedented $150 price was entirely driven by speculation in the market is another matter altogether.
Delivery
Britain's North Sea oil is also ill suited for diesel production, which is why we import about 10 per cent of our diesel and jet fuel and Europe as a whole exports about 39 million tons of surplus petrol to the US. Crude oil suitability is not really the entire issue, nor are refining shortages, either.
"It's more a case of what UK refineries can squeeze out of their current configuration," says Nick Vandervell of the UK Petroleum Industry Association (UKPIA).
Most of Europe's refining capacity is getting long in the tooth and was set up largely to create petrol. It's now finding that it is squeezing more diesel out of equipment ill suited to the task, which is proving highly energy intensive.
In fact, squeezing that last drop of diesel is tipping the whole carbon-dioxide well-to-wheels equation into the negative compared with refining petrol. "In CO2 terms, there's not a lot between the two," says Chris Hunt of UKPIA.
Environment
In other words, because getting that extra diesel is more expensive and energy intensive, your diesel car might not be doing the environment any benefit at all.
One solution might be further investment in hydrogen cracking facilities to get more diesel, jet fuel and gas oil out of a barrel of crude, but that costs about £800 million per refinery.
The balance has just about worked up to now, but there is something of a crisis headed our way in the next 12 months, which is the result of the US's success in switching domestic consumers to corn-based bioethanol.
"Now with the US nearing a refining balance with their ethanol, there's going to be a whole load of surplus petrol sitting in the mid-Atlantic and there will be casualties," Hunt says.
Casualties are likely to include small "mom-and-pop" refineries on the Gulf of Mexico and those unwilling to make the required investments in diesel production in Europe.
It would be premature to be calling it the death of diesel, but one thing the scrappage scheme has done is highlight the limits of diesel's growth.
In supply and regulatory terms it would be hard for diesel to take much more of the market than it does today without getting a whole lot more expensive and presumably unattractive.
Diesel isn't dead, but it isn't likely to grow much, either"
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