Serves the Commercial Small Fleet Market of 10 – 50 Vehicles

U.S. Refineries Won't Be Able to Match Diesel Demand

August 11, 2005

The $12.3 billion energy bill signed by President Bush Aug. 8, establishes a tax credit of up to $3,400 for diesel vehicles, something one DaimlerChrysler executive says could give the alternative fuel source a 5 to 10 percent share of the U.S. market, the Washington Post reported.But despite expectations of growth in the diesel market, the U.S. refining industry cannot produce enough diesel fuel to match significant gains in the number of motorists that burn it.Europe’s success with diesel-powered autos adds to those expectations. However, diesel prices there continue to skyrocket as refiners cannot keep up with the burning demand.Refineries can produce either a high yield of diesel or a high yield of gasoline, but not both. According to the newspaper report, many refineries in Europe, for example, were equipped with gasoline production units before governments began manipulating the fuel market with tax breaks for diesels. Gasoline production brings significantly more money to oil companies, and diesel equipment is much more expensive. European refiners are, however, ramping up efforts in the diesel direction, but it will be five years until they will see meaningful increases in diesel output. Until then, they must import from the U.S.America cannot keep exporting diesel, though, if it wants supply to meet the projected demand. For instance, the expected 5 to 10 percent market share would mean motorists must buy between 800,000 and 1.7 million diesel-engine autos per year, the report said. To significantly increase diesel output, U.S. refiners would need about 10 years. That means diesel drivers would have to deal with higher prices in an increasingly tight market.
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