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Diesel doubts continue

Bowser shock: The growing gap between ULP and diesel has drastically changed the value equation and put question marks over future diesel car resale values.

GoAuto takes a further look into the diesel 'advantage'

General News logo4 Jun 2008

THE GoAuto investigation last week into the growing disparity in price between petrol and diesel fuel, and how it affects the time taken to repay the cost of diesel passenger cars versus petrol cars, attracted a strong response from readers in favour of diesel vehicles.

While the story deliberately dealt only with the impact of increased diesel prices and the dramatic direct impact it has on the time it takes to repay the initial outlay, many readers have argued that we did not include important factors such as the resale value or servicing costs of diesel vehicles – and that there are some diesels that do not cost any more than an equivalent petrol version to buy.

Diesel cars sold in Australia that are also offered as a petrol generally cost extra. As a rule, the diesel passenger car price premium is between $1000 and $4000. Only six diesel models carry the same price as the petrol version, with two actually being cheaper (the Volkswagen Passat and Eos). Our examples last week used a generous annual distance of 20,000km, but according to the latest Australian Bureau of Statistics publication 'Survey of Motor Vehicle Use', the average annual mileage for the Australian vehicle fleet is 14,600km.

This average includes the articulated truck average annual distance of 88,300km, meaning that the private Australian car travels even less than 14,600km.

Using the 14,600km figure, the time to pay off the estimated diesel premium on the sticker price will take much longer than our estimates last week – which in the 2010 Falcon’s case is 23 years at current fuel prices.

If diesel rises to $1.94 and petrol stays the same price, in our example using a diesel Falcon the diesel advantage would be nullified and the initial cost penalty would not be returned by better fuel efficiency.

80 center imageClearly a diesel purchase decision is not all about money, but if that is the reason behind buying one, at present it is a tenuous position.

However, an LPG conversion is far more clear-cut, as illustrated in the Falcon example (see page six), where the LPG vehicle price premium pays for itself in just over one year. In Western Australia, it will take even less time due to a further $1000 state government subsidy. In the ACT, LPG cars have a 20 per cent concession in registration costs.

While LPG is also subject to rising prices (and the phasing in of a federal government tax from 2011), the government subsidy on the installation and the competitively low emissions of LPG (of all emissions, including CO2) clearly make LPG a viable option.

It comes as no surprise that LPG Australia claims that there are a growing number of compact SUV and small-car owners wanting to convert to LPG.

Making it difficult to analyse the economic benefits of diesel is the fact that no-one really knows what diesel prices will do next.

Speaking to GoAuto last week, Volkswagen Group Australia managing director Jutta Dierks was under no illusions about the impact of rising diesel prices. “If it goes on like this, it definitely will have an impact,” she said. “I think everybody is concerned that petrol and diesel prices are going up.” Caltex Australia government affairs manger Frank Tottham told GoAuto that there were conflicting factors at play but insisted diesel would continue to fuel growth in Asia. “Diesel demand is growing. It tends to say that over time there will be more pressure on diesel prices over petrol prices,” he said.

Mr Tottham said that a new large export refinery due to open India later this year should see improved supply of diesel fuel and thus possibly see an amelioration of recent diesel price hikes in Australia. But he added: “The truth is, we don’t generally know where oil prices are going to go.” Fuel prices aside, diesels generally sell for more than petrol equivalents, but that does not mean they have better resale value.

Senior manager of prestige and general vehicles at Pickles Auctions Nick Taylor told GoAuto this week that while “the market is a bit tough at the moment … diesels are always making more (than petrols).” Mr Taylor said that while diesel passenger car resale values were not clearly better than petrol (as is the case with commercial vehicles and 4WDs), those that have a proven track record in the market still do well, such as the Volkswagen Golf. “Golfs typically get $1000 to $2000 more than the petrol equivalent,” he said.

A Golf diesel costs $2500 more to buy new than a petrol, so its resale return is not dollar for dollar, although its resale obviously reduces the payback period of the initial outlay. As reflected in the resale values by industry valuer Redbook, diesels do not generally have any better retained value on their new purchase price than a petrol. They are worth more money as a used vehicle, but cost more to buy new.

Given that even oil industry experts do not know what diesel fuel prices will do, it is not a given that diesel resales will remain equal to petrols. It could go either way.

Short-term servicing costs have come down for diesels, as the more frequent oil-change intervals of older-generation diesels have been extended.

Synthetic oils and cleaner-burning diesel fuel has helped here, too, but figures from Holden, BMW and Volvo received by GoAuto this week all point to a slightly more expensive servicing schedule for diesel models over petrols.

Those who can take immediate advantage of the diesel’s better fuel consumption are the wealthy. Most diesels that cost no more than a petrol are expensive luxury cars.

The new Jaguar XF is an example, with both petrol and diesel V6s priced from $105,500. The 2.7D saves around $11 a week (or $584 a year) over an XF 3.0 V6 petrol (which requires expensive premium unleaded, at around $1.67 per litre, which reduces the effect of the high price of diesel).

While diesels produce less CO2 than petrols (199g/km versus 249g/km for the Jaguar example above) that does not mean they emit less pollution.

Any diesel engine’s particulate and nitrogen oxides emissions are much higher than a petrol engine, and are linked to respiratory and heart disease and cancer. This raises an intractable problem for advocates of diesel – the diesel’s higher risk to human health.

The Australian federal government, in its National Pollution Index, rates oxides of nitrogen as the number one risk to human health, with particulate matter seven on the list of 90 substances.

The savings at the pump of ‘clean’ diesels may also be lost when the sensitive diesel fuel system is filled with bad quality fuel.

A diesel injector pump failure due to contaminated fuel is an expensive fix. Management from the all-diesel SsangYong brand last year noted as part of its ‘no bio-diesel’ campaign that the cost to overhaul an injector pump after contaminated fuel had passed though it was around $5000.

The economic advantages of running a diesel 4WD or commercial vehicle is more clear-cut – particularly in instances where the petrol alternative is usually a large-displacement engine that can consume nearly twice the amount of a diesel alternative in heavy load conditions such as towing or stop-start traffic. The superior torque peak and delivery of a diesel also makes the diesel a clear-cut winner in such instances.

Meanwhile, the problem central to this whole debate – the cost of energy – will not go away.

Well-documented issues regarding the developing world’s massive increase in energy use and that of peak oil – never mind the global-warming issue – are putting paid to the possibility of a status quo or a return to cheap fuel.

Name your poison: petrol, diesel or LPG. All are only going to get more expensive, but as it stands the most persuasive argument is for LPG. It makes economic sense in most instances and produces less greenhouse gases than petrol or diesel.

Of course, petrol-electric hybrids like Toyota’s Prius and Honda’s Civic Hybrid also are strong on the environment and air- pollution fronts, simply because they burn less fuel and therefore emit less greenhouse gases. The same applies for a forthcoming generation of diesel hybrids from European makers, although their risk to human health will of course be greater than petrol hybrids.

There is little doubt, given recent history, that fuelling a car will only become more expensive, whatever it is. Just don’t take it as read that the silver bullet to rising car running costs and escalating problems with the environment and air pollution is inscribed with the word ‘diesel’.


Ford Falcon petrol, LPG and diesel compared:
Vehicle Falcon XT petrol Falcon XT E-gas Falcon XT diesel Falcon XT diesel
Price $36,490 $37,890 $40,490 $40,490
Fuel type Unleaded LPG Diesel Diesel
Transmission 4-speed auto 4-speed auto TBA TBA
Power 195kW 156kW TBA TBA
Torque 391Nm 370Nm TBA TBA
Average L/100km 10.5 15.5 8.5 8.5
Fuel cost/L $1.57 $0.65 $1.80 $1.94*
Average km/year 14,600 14,600 14,600 14,600
Fuel cost/year $2406.81 $1468.69 $2233.80 $2407.54
Vehicle price difference - $1400 $4000 $4000
Fuel advantage per year - $938.02 $173.01 -$0.73
Purchase cost break-even point (years) - 1.49 23.12 0
* Diesel fuel price at which diesel model no longer at an economic advantage, if petrol price stayed at $1.57.

To read all comparative data in detail, download GoAutoNews here

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Diesel dilemma

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