photo credit: 10 Ninjas Steve

Fuel’s future is in designing, not refining

LAST month, your columnist raved about the new generation of lean, clean diesel cars arriving belatedly in America (“Diesel’s second coming”, April 4th 2008), but wondered where they might find their fuel. With oil pushing $120 a barrel, the diesel’s fuel-sipping charms—it delivers about 30% more miles per gallon (MPG) than regular petrol—have created a shortage of diesel fuel around the world.

Soaring prices followed the shortage. Over the past year, the average price of diesel in America has risen by 117%—twice as fast as petrol. It is now 20% more expensive (60-70 cents more per gallon) than regular gas. Rising prices like these could easily negate diesel’s MPG advantage.

Half of all new cars bought in Europe are diesels; Europeans have pretty well hogged the supply of diesel fuel—from oil refineries as well as from renewable crops. In fact, much of the biodiesel produced in the United States from soybeans and corn (and subsidised by American taxpayers to the tune of $1 a gallon) winds up in Europe, where it benefits from still further subsidies. That’s great for farmers in the Midwest, but offers little consolation to motorists across America.

Now comes news that another major source of diesel—South-East Asia, where it’s refined from palm oil—is drying up. Refiners throughout the region are closing biodiesel plants and canceling new ones. Most are being priced out of the business by the soaring cost of palm oil, which has been rising even faster than crude.

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