diesel truck buyers purchased their trucks assuming the lower operational
costs of diesel versus gas, better performance and higher resale value
would eventually recoup the initial premium paid for the oil
burning option. But the current 80 cent price gap between gas
and diesel, plus costs added by new emissions requirements, make it
unlikely new diesel truck buyers will ever reach a break-even point
financially, unless they are towing the biggest loads that can’t
be pulled with a gas engine.
are already responding to the drop in diesel demand.
sales of Dodge Ram pickup trucks, Cummins Inc. announced in May it
will temporarily layoff 125 employees until production begins on 2009
Rams in August. DMAX Ltd., the joint venture between GM and Isuzu that
builds the Duramax diesel for GM’s heavy-duty pickups, said
it will cut 290 workers and reduce engine production by 28 percent based
on current and forecasted market demand. And Navistar International is
temporarily laying off 500 workers until mid-July because of lack of
demand for Ford Super Duty pickups equipped with its Power Stroke diesel
hikes and drops in vehicle resale value are likely to negatively impact
the long-anticipated introduction of diesel engines in light-duty pickups
next year. Chrysler, Ford and GM have promised to introduce half-ton
pickups with diesel engines before the end of 2009. Toyota has also
promised a diesel engine for the Tundra in the "near
they're not expected to carry as steep a price premium as heavy-duty
diesel powertrains, light-duty diesels won’t be as capable either.
They're being pitched as having 20-25 percent better fuel
economy than comparable light-duty gas engines but the current 20 percent
cost difference between regular gas and diesel eclipses most of this
light-duty diesel engine course was charted by product planners years
ago, other potentially alternative powertrains
were dropped by truck manufacturers. As late as 2006, GM offered
a compressed natural gas (CNG) fuel system for its Chevrolet Silverado
Classic 2500 and 3500 HD pickups as a from-the-factory option for only
$850. CNG currently costs about 70 cents a gallon, or just under $1
per gallon of gasoline equivalent. CNG has about 10-15 percent less
energy than an equivalent volume of gasoline. GM also dropped its diesel-like
8.1-liter gasoline V-8 engine, rated at 330 hp and 450 lb-ft of torque.
Both the CNG option and the 8.1-liter V-8 were killed because of lack
of demand from heavy-duty truck buyers who, at the time, favored more
capable diesel engines with relatively low-priced fuel.
If you currently
own a diesel or have been planning to purchase one, don't panic yet.
a chance the price of diesel fuel could start to noticeably decrease
before the end of the year if global demand drops or a speculative
bubble in oil trading pops.
like India and Malaysia, that have traditionally subsidized fuel costs
for their citizens are finding they
can no longer afford to do so with
the cost of oil exceeding $130 a barrel. These countries are starting
to pass along dramatic price increases to their populations. India
recently increased prices of gasoline and diesel by 10 percent while
Malaysia increased gasoline by 41 percent. Malaysia promises a diesel
fuel hike is coming soon. Some are predicting China could raise its
fuel prices too, following the Olympics this summer. Higher prices
in Asia should cause demand to drop - good news for U.S. drivers who
have had every price hike passed along directly to our wallets.
movements up and down in the price of oil indicate irrational
traders may be affecting fuel prices more than demand forces. Like
a giant pyramid scheme, where speculators assume they can buy oil at
today's high price and 'flip' it again at an even greater price, we
may be approaching the limits of buyers' appetites. A drop in demand
in the financial markets could cause a rapid downward cascade in oil
prices if traders are forced to sell their oil holdings to avoid losses
as the price of a barrel of oil falls.
Funny as it
*might* be a good time to buy a used diesel pickup on the cheap.