In The Media - Diesel a Savior in Squeeze on Energy? Obstacles Exist

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Posted by: Community Fuels

5/29/2006

New York Times, WASHINGTON, May 26 — Forget about navigation systems and sunroofs — the sales pitch at a time of sky-high fuel prices may soon be a tempting patter about high mileage for buyers of the newest diesel models.

Monday, May 29, 2006 Diesel a Savior in Squeeze on Energy? Obstacles Exist
New York Times, WASHINGTON, May 26 — Forget about navigation systems and sunroofs — the sales pitch at a time of sky-high fuel prices may soon be a tempting patter about high mileage for buyers of the newest diesel models. With a new kind of diesel fuel entering the market in the next few days; new technologies that vastly reduce problems with noise, smell and performance; and federal tax benefits like the ones offered for hybrid-electric vehicles, car manufactures are hoping to get consumers excited about more diesel-powered cars and sport utility vehicles. Though President Bush, who often mentions diesels as a promising way to promote a sharp rise in fuel economy, has laid out goals to reduce oil imports, those goals may be extremely difficult to reach, some experts say. Some auto industry experts predict that with new technology and tax breaks, the American market could become more like that of Europe, where half of new autos are diesel powered. There is some doubt, however, over whether refineries can keep up with that demand without a sharp rise in diesel prices. Kevin B. McMahon, director of the Martec Group, a consulting and market research firm in Detroit, said consumers who now buy gasoline pickups or cars and choose an optional bigger engine, giving up a mile or two per gallon of fuel economy, will soon buy diesels instead. "Diesels deliver the kind of premium performance and exceptional durability that customers want, and they are willing to pay a premium to acquire," Mr. McMahon said. The government is already on board. Last summer's energy bill makes so-called clean diesels eligible for the same tax breaks as hybrids, and Mr. Bush has said that diesels could help solve what he has called the nation's addiction to oil by going 30 percent farther per gallon than gasoline-powered vehicles. Such diesels will be on the market in a few years. But some experts caution that there may be less there than meets the eye. For one thing, diesel is still a form of petroleum, and the ability of refineries to produce it in lieu of gasoline is limited. And it would take expensive investment to change the gasoline-to-diesel production ratio. In Europe, diesel demand is high and growing by 1.5 percent a year, and "that's impossible to accommodate in a refinery," said Gene Tunison, manager of fuels development and policy planning at ExxonMobil. Instead, European refineries are processing more crude oil to keep up with diesel demand and accumulating surplus gasoline that they export to the United States. That system is working because the United State has a shortage of refinery capacity, but if every country were to embark on a diesel strategy, refining would have to change radically, experts say. Today, gasoline accounts for about half of what American refineries produce. An additional 25 percent is diesel or home-heating oil, and about 10 percent is jet fuel. Diesel, heating oil and jet fuel are similar products, and their price is set by a market that is only loosely tied to gasoline. Supply and demand make diesel more expensive than unleaded regular gas at some times, and less expensive at others. Globally, demand for all three products is rising, said Joanne Shore, a senior analyst at the Energy Information Administration. A milestone was reached last year when diesel fuel, which usually sells at a discount to gasoline, reached parity. Sales of diesel vehicles will be limited in areas where diesel costs more, Ms. Shore predicted. But new technology and regulatory policy are creating the possibility of more attractive diesel vehicles. Beginning June 1, refineries must produce what is known as ultra-low sulfur diesel, with no more than 15 parts per million of sulfur, down from 500 parts per million. Removal of sulfur will allow car companies to install filters to catch soot (current diesel fuel would overwhelm a filter). "It's analogous to taking the lead out of gasoline," said Allen Schaeffer, executive director of the Diesel Technology Forum, a trade group. Lead-free gasoline allowed the installation of catalytic converters in cars to control tailpipe emissions. In October, the low-sulfur diesel must be available at filling stations. That, said Mr. Schaeffer, "really opens up the door for the entire diesel industry." For the complete article please link to: http://www.nytimes.com/2006/05/29/us/29diesel.html?pagewanted=1&ei=5070&en=01f65081860ab6f5&ex=1149566400&emc=eta1
	MATTHEW L. WALD

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