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Embracing diesel passenger cars

U.S. taxes may be hampering demand for diesel vehicles
Monday, June 23, 2014 - 07:00

The U.S. is unique among developed countries in that consumer demand for diesel-powered cars is practically non-existent.

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Sure, there are rabid fans of “oil burners,” as diesel power plants are called, but they account for a small number of vehicle owners. Consequently, they simply are not offered in the U.S. by many car companies that have robust diesel sales in other countries. 

So why don’t Americans like diesel, despite their reputation for exceptional fuel economy? Many blame the ill-fated General Motors Oldsmobile and Cadillac modified gas-into-diesel engines of the late 1970s. The fact that those models self-destructed after fewer than 30,000 miles may well have scared off Americans from diesel power. Others say the old diesels that belched exhaust like a smoke screen from a James Bond car and accelerated like an arthritic snail left a long-lasting negative impression as well.  While those two factors undoubtedly steered generations away from diesel, our federal and state governments’ tax rates also play a role in limiting diesel’s acceptance.

The United States federal excise tax on gasoline is 18.4 cents per gallon and 24.4 cents per gallon on diesel fuel. On average, as of January 2013, state and local taxes add another 30.4 cents to each gallon of gasoline and 30 cents to diesel, for a total US average fuel tax of 49.5 cents per gallon for gas and 54.8 cents per gallon for diesel. 

The United States is one of the only developed country where diesel costs more at the pump than regular unleaded gasoline, despite the fact that diesel costs less to refine than unleaded gasoline. So, if it costs less, why is it taxed more and why, when prices fluctuate, does it not rise or fall at the same rate that gasoline does?  The theory behind the different taxation stems from the fact that the U.S. still views diesel as the fuel of heavy trucks, and heavy trucks cause more damage and wear and tear on the highway infrastructure. To compensate for the added wear and tear, the excise tax is higher. In addition, refineries don’t produce diesel #2 for passenger cars in the same volume as unleaded gasoline. This keeps U.S. diesel prices higher than in the rest of the world. It also means that the rate of replenishment differs at fuel stations, causing the price of diesel to change at a different rate than unleaded gas.  

This is unfortunate and short sighted. Modern diesel cars behave much differently than those we remember from the 1970s. Diesels today are reliable (including the Opel-based GM diesel engine offered in the Chevrolet Cruze) and offer great torque and acceleration. They are also significantly easier on the ears both inside and outside the vehicle. Gone too are the soot-laden exhaust fumes; today’s diesels have been re-engineered to burn cleaner and, for larger diesel engines, each manufacturer has developed a urea injection system. (Smaller Jetta diesels don’t require urea injections). The urea additive adds some complications to diesel vehicle ownership since the tank resides in the truck and sprays the exhaust to lower emissions output, creating a “clean diesel.” However, the tank must be refilled every 10,000 miles or so, and while it’s not expensive (about $30 for the liquid and is DIY friendly), if you ignore the warnings about the tank running low, the car will not start if the urea tank runs dry.                

So, will it change? If the lobbyists for BMW, Mercedes, VW and GM are successful in their lobbying efforts for a fairer tax rate, running diesel will offer a bigger financial advantage. It’s an advantage that could potentially be better than hybrid running costs. That should bring buyers interested in high mileage and low-running costs into dealerships. My advice is to start educating yourself about diesels, because I think we’ll be seeing more of them soon.

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