Traditionally, 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.

Engine manufacturers are already responding to the drop in diesel demand.

Citing slow 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 engine.

Diesel price 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 future."

Although 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 advantage.

When the 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. There’s 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.

Asian countries, 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.

Recent sudden 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.

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