The great diesel efficiency myth

Diesel prices are set to rise, and your diesel car may not be as efficient as you think it is.

Diesels are less efficient than you think – and prices are about to rise.

Drivers of diesel cars are about to feel more pain at the pump as figures show they’re less efficient around town than owners expect. Adding to the anguish is the imminent seasonal increase in demand for the fuel in China, Europe and North America, which pushes up prices globally.

Oil companies use diesel to also make heating oil, which adds price pressure as the northern hemisphere heads into winter. “All the heating oils have gone up and that’s not uncommon at this time of year,” says the NRMA’s Peter Khoury.

The average price of diesel has risen to more than $1.60 per litre in recent weeks, up to 20 cents a litre dearer than unleaded petrol at its discount peak and on par with premium unleaded fuels.

Even though sales of diesel vehicles have tripled over the past 10 years, diesel passenger cars still only account for 4 per cent of new cars sold while diesel SUVs account for 10 per cent and diesel utes and vans 15 per cent. “Despite the increasing popularity of diesel cars the fuel itself is still bought in relatively low volume at service stations, so there is not as much competition driving prices down,” said Mr Khoury.

Figures from the Australian Institute of Petroleum show that only 25 per cent of all diesel is sold at service stations; 75 per cent is bought in bulk by the mining and agriculture industries. Of the diesel fuel sold at service stations about 80 per cent is bought by the long-haul trucking industry which gets a 12 cents per litre rebate from the Federal Government.

The concession to trucking companies cuts their fuel excise to 26 cents per litre. The mining and agriculture industries pay no excise as they’re entitled to a full rebate of 38 cents per litre. Drivers of diesel cars pay 38 cents per litre in fuel excise, the same as drivers of unleaded vehicles.

Meanwhile Australia’s love affair with diesel cars may prove to be misguided for some buyers. Figures from the Federal Government’s Green Vehicle Guide show that while diesel cars are more efficient on the open road than petrol cars, they’re advantage is diminished greatly in city and suburban driving.

“You still get savings in a diesel car but the reality is the savings aren’t as great if you’re only driving around town,” said Mr Khoury. “Plus, some of the latest petrol engines are almost as efficient as diesel engines, and in most cases petrol cars are cheaper to buy.”

The latest Volkswagen Golf 90TSI petrol sips an average of 5.4L/100k, just a fraction more than the superseded Golf 77TDI which uses 5.2L/100km, according to Green Vehicle Guide fuel rating label figures.

“It comes down to individual driving habits,” said Mr Khoury. “People need to do their research and find what suits them best. If you do a lot of open road driving a diesel might make more sense, but around town some of the new petrol engines might be better.”

Why diesel is expensive

  • Diesel is the dominant fuel in Asia and a sharp rise in demand for diesel in India and China has pushed up prices.
  • Demand for diesel in Australia has increased with the mining boom.
  • The supply of diesel has not kept pace with the growth in demand.
  • The price of diesel is affected by demand for other products it also is used to produce, including jet fuel, kerosene and heating oil.

Who buys diesel?

  • Only 25 per cent of diesel sold in Australia is sold at service stations; the remaining 75 per cent of diesel is bought in bulk by the mining and agriculture industries.
  • Of the 25 per cent of diesel sold in Australia at service stations, less than a third of it is bought by private customers — passenger cars: 4 per cent; SUVs: 10 per cent; utes and vans: 15 per cent.
  • Those three vehicle categories — passenger cars, SUVs and utes — consumed an estimated 2000 million litres of diesel last year.
  • Trucks consumed 9600 million litres of diesel last year.

Why diesel isn’t expensive compared to the rest of the world

Australia is the sixth cheapest country for diesel fuel among the 29 OECD countries, according to March 2013 figures from the Bureau of Resources and Energy Economics.

This is largely because Australia has the sixth lowest tax rate in the OECD. Only Japan, Canada, Mexico, New Zealand and the United States have cheaper diesel fuel.

This reporter is on Twitter: @JoshuaDowling

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