By David L. Brown
Yesterday I filled the tank of my Jeep Liberty and paid $3.199 for regular gas here in New Mexico. Always alert to the trends, I checked the price of other fuels and was amused to see that diesel fuel was going for $3.999 at the same pump, fully eighty cents more than I was paying for gasoline.
We have been warned that four dollar gas is likely to be coming soon this Spring, and there on the second day of Spring I was seeing, if not gas, at least diesel fuel priced at, well, a-l-m-o-s-t four dollars. (What’s one tenth of a cent worth these days?)
It never ceases to amaze me that oil companies presently price diesel fuel, which is a cruder form of refined petroleum and cheaper to make than gasoline, at even higher prices than gas. (At the Shell station yesterday where I buy my fuel, medium grade gasoline was $3.299 and top grade was $3.399, so the diesel was priced sixty cents a gallon higher even than premium gas.)
So what’s going on with that? Having been around for a while and with some relevant experience I think I can provide some perspective. Around 1970 I was doing a lot of road traveling. How much? Well, so much that I ran through a 36,000 mile lease on a 1989 Pontiac Bonneville in just 10 months and turned it in. With that many miles going beneath my tires, I decided to buy a Mercedes-Benz 220D diesel car. That lovely gem cost around $5000 and got a steady 30 mpg from its two liter, four cylinder diesel engine.
Here is a photo I found of a 1970 M-B 220D, this one outfitted as a taxi in Europe. Mine was dark green and did not have the amber fog lights, although it did boast a M-B badge on the grille that I picked up during a tour of the Mercedes factory near Stuttgart, Germany.
At the time I was driving that car I quite clearly recall that at my home base in the west suburbs of Chicago diesel fuel was selling for 30 cents a gallon, compared with 40 cents for regular gasoline. Therefore, I was clocking one cent a mile for fuel costs, and since I was able to bill my clients at a dime a mile, my fuel costs were only ten percent of what I received. That was far and away enough to make payments, maintain, and insure the vehicle. (Diesel fuel was often even cheaper than in Illinois; I remember once filling up somewhere in Wyoming at 17 cents a gallon. Those were the days!)
Now note that at that time diesel fuel was priced at around 75 percent of the price of gasoline. If that were the case today, instead of four dollars diesel fuel should be selling for around $2.40 relative to regular gas at $3.20. So what happened?
Well, this is my theory on it: It is the result of cold, calculating greed on the part of the oil companies. Hmm, hard to believe isn’t it? But the evidence is there. It was in 1973 that the first oil shock took place, and Americans began to wake up to the benefits of high mpg vehicles. The Mercedes diesel cars were excellent if expensive (although they held their value remarkably well, as demonstrated by the fact that I sold that 1970 220D with 93,000 miles on it for just $600 less than I paid for it brand new.) More people became interested in diesel powered cars.
Clearly the oil companies noted that there were people who were buying expensive cars and then burning cheap fuel in them, fuel that took them further down the road than ordinary gasoline. Oil companies don’t like the sound of words like “cheap” and “efficient” and especially the phrase “high mpg,” so they were quick to take advantage of the situation. The relative price of diesel fuel began to rise, until as we can see today it is the highest price fuel available at service stations.
America might still have switched to the more efficient fuel except for the unfortunate fact that that in 1978 General Motors introduced its own version of the diesel car, a full-sized Oldsmobile. Unfortunately, GM blew it big time. They opted not to install true diesel engines in the cars (which were great lumbering sedans almost the size of young whales), but rather to “adapt” an engine designed for gasoline to burn diesel fuel. That didn’t work so well, as many participants in a famous class action suit against GM may well recall. Unlike gasoline engines which work by igniting a fuel-air mixture with a spark, diesel engines function by compressing the fuel-air mix to a high pressure until it combusts. The converted gasoline engines couldn’t hold up under the high compression and failures were common.
And that was pretty much the end of diesel cars in the U.S. The greed of the oil companies and the short-sighted engineering of General Motors combined to turn buyers away from the concept. After a while the lessons of the oil shock were forgotten and Americans went back to driving gasoline driven cars. Eventually, thanks to ill-thought-out loopholes in the CAFE fuel efficiency standards supposedly enforced by the government, the SUV was “invented.” Classed as “light trucks,” these supposedly rugged off-road vehicles, 95 percent of which never leave pavement, became the standard chariot on the American scene. Oil companies and auto makers continued to rake in the cash, and American consumers continued to pay and pay.
The stark error of those strategies, which were based on cheap and abundant supplies of oil, is starting to come into clear focus as the Oil Peak approaches or as many believe has already passed. Now ordinary gasoline continues to climb in price and will no doubt reach the predicted four dollar mark in the near future, then possibly continuing to five, six, or even ten dollars a gallon in the future as long as excessive demand continues to leverage up a declining supply. Viewed with 20-20 hindsight it is a great shame that America took the wrong fork in the road 30 years ago when we could have moved toward more efficient vehicles, including diesel models.
And if you doubt that ten dollar fuel could be likely, consider that such a price would be only 2.5 times higher than the four dollar gas that is probably going to be with us soon. Working backward, that same factor of 2.5X would take us from $1.666 a gallon to $4. Remember $1.666 gas? It wasn’t that long ago was it? No, it wasn’t, and in fact U.S. pump prices were in that range as recently as 2002.
Quality diesel cars continued to be made in Europe, where they are extremely common to this day. A few models have been imported to the U.S., including the Diesel Rabbit from Volkswagen and various models from Mercedes, but they have never captured much market share. I owned two more M-B diesel cars, a 1973 220D and a 1979 300CD coupe, putting many thousands of trouble free miles on those cars.
My experience with diesel vehicles did not end with the three Mercedes cars I owned over the years. During 1996-7 I spent a great deal of time driving some 60,000 miles all over Europe. My vehicle was a snazzy little motor home built in England (right-hand drive) on a Ford Transit chassis. Its power came from a 3 liter diesel engine that ran like a watch and sipped fuel, which even then in Europe sold for around the four dollar mark that is only just now being reached in the U.S. In Europe, fuel was subject to high taxes aimed at encouraging the use of efficient vehicles. As a result a large share of cars, vans and light trucks in Europe today run on efficient diesel fuel, considerably reducing the Continent’s exposure to growing oil scarcity. This is demonstrative of what we might have achieved here if America had taken a different turn in the road 30 years ago.
Anyway, the sight of $3.999 per gallon diesel fuel yesterday brought back some memories — and reminded me of the tragedy of a nation that stuck with gas-guzzling vehicles when there were more economical alternatives at hand. And of a government that allowed Detroit to skate past efficiency standards and continue to push inefficient SUVs, vans and pickup trucks on the buying public. And most of all, I was reminded of the greed of oil companies which have made crude diesel fuel a premium product to take advantage of those who might otherwise be willing to invest in more efficient automobiles. Shame on them, shame on us all.