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TMFMmbop (40.06)

Now is the time to buy a diesel engine

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July 23, 2010 – Comments (9)

Just learned these two fascinating facts:

1. The energy density of diesel is 1.12x that of gasoline.
2. Diesel engines are 1.3x more efficient than gasoline engines.

Ergo, the benefit of 1 gallon of diesel v. 1 gallen of gasoline is 46% more distance.

Thus, with $3 gas, diesel should cost $4.38/gallon. But it costs the same, which means you can exploit a pretty hefty market anomaly by driving a diesel car.

9 Comments – Post Your Own

#1) On July 23, 2010 at 11:09 AM, SkepticalOx (99.53) wrote:

Just pondering, if more people started driving diesel, would diesel prices go up (extra demand), or go down (extra supply to meet that demand and economies of scale)?

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#2) On July 23, 2010 at 11:36 AM, DukeTG (< 20) wrote:

If you're going to be rigorous about the tradeoff in diesel vs. gas, you have to factor in the premium that diesel engines command over their gas counterparts. I think that's somewhere around the $2000 range.

With that in mind, there is still a tax credit for buying a new diesel vehicle. I think it's gone down for the second half of the year, but a credit is a credit.

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#3) On July 23, 2010 at 12:18 PM, GNUBEE (24.25) wrote:

My theory is from a resource allocation standpoint.

Europe uses diesel and some Nat Gas and US uses gasoline. Keeps vehicular fuel demand spread out. If not you would end up with a surplus of one or the other, as they are both produced from the refining process.

US emissions also require NOx scrubbing (urea or other), and low sulfer diesel.

So it depends on which continent you are on. Don't stock up on diesels just yet.

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#4) On July 23, 2010 at 1:52 PM, DukeTG (< 20) wrote:

I don't think refining of petroleum is an "either-or" thing with gas/diesel. The components of gasoline are a separate distillation than that of No. 2 Diesel.  I think there's much more overlap between diesel and heating oil.

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#5) On July 23, 2010 at 2:11 PM, GNUBEE (24.25) wrote:

No I'm saying with gasoline diesel is produced. If your aim is more diesel, you'll have an oversupply of gasoline and vice versa.

I think each barrel produces 1/2 the amount of diesel for each gallon of gasoline. So refiners end up with both products, but want to be able to sell both at the best price. So if the US consumes 2x (in gallons) as much gasoline as Europe's diesel, the refiner has an optimim consumption to production scenario. If the world consumes only diesel, there is an over (unecessary) production of gasoline.

No2 diesel and heating oil are one in the same. Bunker diesel is a lower grade diesel for Ships and power generation.

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#6) On July 23, 2010 at 2:13 PM, GNUBEE (24.25) wrote:

edit to first sentence:

Refining a barrel of oil produces both gasoline and oil.

(I've got Porte disease...)

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#7) On July 24, 2010 at 10:40 PM, weihou258 (< 20) wrote:

I like battery not only because it is good for the environment. Maybe it is not realistic in US now. But it will be the direction in China. Just learned China is the largest energy consumer in the world. I still do not believe it. China can not afford that. Not sure team in China weeks ago noticed this or not. Many bicycles and motorcycles are powered by battery, particularly in tier II and III cities. All taxies are powered by nature gas (required by government). Who knows, from one day, government may ask all taxies must use battery. For regular consumers, government is giving disconnect on battery powered cars, bicycles and motorcycles.Batteries made by ABAT were used on buses during 08 Beijing Olympic. I also pay close attention to US companies like HEV and AONE. People may not like them here. But I think they will be doing well. Because they are built by Obama. Chinese government will be forced to import them, just like China has to ask AMAT and FLSR to build solar power factories even it has largest and most solar factories in the world. Actually, HEV already teamed up with a big Chinese auto parts maker (000559, listed in Shanghai). I think under $3 dollars, HEV is a buy. Comments on HEV and AONE are welcome.  Planning to buy.Thanks, Wei.

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#8) On July 27, 2010 at 10:05 AM, RichK (< 20) wrote:

Over the past 20 years, Europe has moved towards diesel cars, largely thanks to diesel's tax advantages and much higher fuel prices for both gasoline and diesel (compared to the US).  With that fuel-efficiency, unfortunately, came higher emissions of particulate matter (triggers asthma, cancer, etc.) and nitrogen oxides (contributes to smog and acid rain).  Today, US emission standards are tougher than Europe's, so we can get diesel cars as clean as our gasoline cars - and that are more efficient. 

For most drivers, however, the incremental cost of the diesel (and hybrid) cars is not recouped by the efficiency savings because they simply don't drive enough.  Tax credits (referred to above) help on this front, but not entirely.

My prediction for ten years out:  US car buyers who mostly drive on highways and who drive high mileage/year will buy diesels because diesel cars are most efficient at a steady-state, highway-style of driving; those who mostly drive in stop-and-go will buy hybrids because hybrids are most efficient when they can take advantage of the regenerative braking that occurs most frequently in stop-and-go driving; and the rest will buy gasoline vehicles that are more efficient than today's models.  Most people will be in the latter category, unless something dramatic happens to the incremental costs of diesels and hybrids.

 

 

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#9) On July 30, 2010 at 10:15 AM, DukeTG (< 20) wrote:

@GNUBEE:  Thanks for making that clearer.  I'm with you now.  I could see that being a problem if the US ramps up diesel vehicle production, but right now there are few options compared to gas (for passenger cars, at least.

@RichK:  I'm not sure I agree that that the incremental cost of diesel is not recouped.  I just did a quick calculation.  Assume diesel costs 20% more than gas (I think that's a bit on the conservative side), and that a diesel vehicle will get about 20mpg more than a gas one (I think that's about true for the new VW TDI's).  If you drive the car 100k miles, you'll save a little over $3k.  I think that's probably more that the engine premium.

Now, granted you have to own the car for a while to see your savings come in, but anyone who swaps cars every three years is probably not concerned about maximizing their value.

Plus you have to factor in the sense of superiority you get with driving a high-mpg vehicle that can run circles around a Prius.  It's hard to put a price tag on that.  ;)

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