Autos

Bad news for diesel drivers as gas prices plummet

American motorists have a particularly good reason to celebrate the new year, with the average price of regular, unleaded gasoline ending 2014 near $2.30, according to federal data.

But not everyone is sharing in the good news. According to the most recent figures from the Energy Information Administration, the relatively small number of motorists—along with the nation's truckers—who depend on diesel fuel were still paying an average of $3.21 a gallon as of Dec. 29.

Although that marks a decline of nearly 70 cents compared to the prior year, it's nowhere near the $1.03 plunge in gas prices over the same period.


A customer refuels his vehicle at a U-gas station in Miami.
Getty Images

There are signs that the widening cost gap is starting to short circuit the nascent comeback of the diesel market. At Volkswagen, for example—the largest player in the segment—diesel vehicle sales have dipped to less than 20 percent of its overall U.S. sales mix through November. That's down from more than 25 percent earlier in the year.

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"It's too early to call it a trend," but there are clear signs of weakness in diesel sales, said Dave Sullivan, manager of product analysis at AutoPacific.

Sales of diesel-powered vehicles had been on a clear upswing after virtually disappearing in the late 1980s and 1990s. For the first six months of 2014, diesel sales surged a full 25 percent compared to the prior year, while the overall American auto market increased just 4 percent.

Choppy oil predictions for 2015
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Choppy oil predictions for 2015

That increase was due, in part, to several automakers boosting their diesel fleets over the past several years.

Audi, for example, brought out three new "oil-burners" for 2014, and another for the current model year. In 2013, Chevrolet launched its first diesel-powered passenger car in decades, a version of the Chevrolet Cruze. Also for the 2014 model year, Chrysler added the Ram EcoDiesel pickup, winning over new buyers and a number of prestigious awards.

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Though diesel fuel has traditionally been more expensive, it's usually only about 25 cents or 50 cents pricier, depending on the state. And because vehicles that run on diesel are more fuel efficient than traditional gasoline-powered cars, drivers were often willing to shell out the extra dough.

Now, however, there are a number of factors driving the larger gap between gas and diesel prices.

Local tax policies are one culprit, as some states charge more for diesel fuel to make up for higher road maintenance costs caused by heavy truck traffic. Another factor is that the U.S. now exports a significant portion of the diesel fuel it produces, causing domestic prices to rise from the competition.

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And because diesel fuel is also used to heat homes, a severe cold snap can also push prices higher, Sullivan said.

Still, it remains to be seen whether the gap between gas and diesel fuel will continue to widen, and if so, for how long. As for whether sales of these vehicles will continue their downward trend, December's auto sales results—to be released Monday—should offer a clue.