There’s no question: Volkswagen is hurting. Three months after the German automaker, which also sells passenger cars under the Audi and Porsche brands, admitted to installing software on up to 11 million vehicles worldwide to cheat diesel emissions regulations, experts are debating whether the scandal could stall the slow yet steady rise in diesel pumps across convenience stores.
“The bigger question we have is: Will the Volkswagen emissions situation have a collateral effect and damage the overall diesel opinion?” says John Eichberger, executive director of the Alexandria, Va.-based Fuels Institute, a nonprofit think tank founded by NACS in 2013. For Eichberger, the Volkswagen emissions scandal is “a small piece of the pie”—light-duty diesel vehicles make up less than 3% of the vehicles on the road; of that, cars and SUVs (primarily what Volkswagen produces) make up 0.5%.
The Broader Diesel Market
One month after the September scandal, the Fuels Institute surveyed 1,200 consumers and found about 60% of respondents had heard of the scandal. Perhaps more interesting was the ambiguity of whether VW’s sins would punish the broader diesel market. According to the survey, 42% said they still would consider purchasing a diesel vehicle, compared to 41% a year ago.
Respondents were also asked if their views on diesel vehicles improved, stayed the same or gotten worse in the past three to six months. Seventy-three percent said no change, 14% said more positive and 14% said more negative.
Eichberger’s conclusion? Customers do not plan to punish the diesel market for one manufacturer’s misdeeds. However, a leading U.S. oil analyst vehemently disagrees.
“Things like consumer fraud stick with the consumer for a long time,” says Tom Kloza, global head of energy analysis for Oil Price Information Service (OPIS), Gaithersburg, Md.
Although Volkswagen CEO Matthias Müller recently sought to assure the public that the company expects to fix the software problem by early 2016, consumers aren’t likely to forget that the 11 million vehicles involved in the scandal were pumping as much as 40 times the allowed level of nitrogen oxides into the air.
Diesel has incurred consumer wrath in the past. Kloza fears the latest news “reinforces the myth, and it is a myth that diesel is dirtier than gasoline.” And based on today’s diesel standards, applying the word “dirty” is a myth. According to the Diesel Technology Forum, ultra-low-sulfur diesel (ULSD) contains 15 parts per million of sulfur, compared to 500 parts per million prior to 2006 and mandatory use in 2010, which equates to 97% less sulfur today.
Something else undercutting diesel’s rise across midpriced cars is the retail cost of fuel, despite a closing gap between it and gasoline and a realization that the country is enjoying its lowest gas prices since 2009. “There’s a laziness inherent in the American consumer, particularly when it comes to fuel,” Kloza says. “They don’t want to do the math and realize that maybe diesel at $2.49 is a better bet than gasoline at $2.20.”
So, Kloza says, here’s the math: Bad reputation for being dirty plus higher cost plus a Volkswagen scandal equals tough times for diesel-fuel sellers. And, he says, “this isn’t going to disappear.”
Moving Forward
Allen Schaeffer hopes Kloza’s comments are full of fumes. He has good reason to support Eichberger’s cautious optimism.
Schaeffer is executive director of Frederick, Md.-based Diesel Technology Forum. He hopes that whatever is lost in the VW mess will be offset by new and more efficient diesel-engine vehicles hitting the market.
“This is one situation involving a single manufacturer that’s going to work itself out one way or the other. There’s still plenty of clean-diesel cars, light trucks and SUVs available for consumers to buy right now, and there will be even more of those models coming in the 2016 model year,” Schaeffer says, citing the Chevrolet Colorado and GMC Canyon, two pickup trucks with diesel options for 2016.
And more diesel options mean more of a need for diesel fuel. “We are encouraged by the trend we are seeing of installation of more diesel fuel pumps at new and renovated convenience stores across the country,” he says. Proving his point, Schaeffer says more than half of all gas stations that sell fuel have at least one diesel pump, compared to about a third in 2000.
Kloza of OPIS remains cautious, though: “If [retailers] are saying ‘I’m going to get high margins,’ they are absolutely correct, but if they are saying ‘I’m going to get demand growth,’ they better hope they are in an area with a lot of construction, a lot of agriculture or industrial demand, because I don’t think they are going to get the growth from light-duty vehicles.”
Volkswagen in Europe
As part of the emissions scandal, Volkswagen recalled 8.5 million diesel cars in Europe, which leads the world in diesel passenger car use.
In 2014, diesels accounted for more than half the new cars sold in Western Europe compared with 14% in 1990, The New York Times reports.
Drawn by lower taxes on diesel fuel and lower tax and registration fees on diesel passenger vehicles, European consumers have long leaned toward diesel cars.
“If you go to France, people are driving more diesel cars than gasoline cars … because there were all sorts of incentives to use diesel,” says Tom Kloza, global head of energy analysis for Oil Price Information Service (OPIS), Gaithersburg, Md.
The New York Times says 64% of the vehicles in France are diesel, with French-made Renault, Peugeot and Citroën diesels joining Volkswagens on the road. About 48% of the vehicles in Germany are diesel.
But Kloza wonders if the percentages will go down in the wake of the recall. “Not necessarily this year, but [there is] the potential for the European community to embrace gasoline much more than diesel,” he says.
Top 10 States for Diesel Drivers
States in the West had the highest percentage of diesel passenger vehicles (cars, SUVs, pickup trucks and vans) in 2014. The national average was 2.88%.
| 1. Wyoming | 11.0% |
| 2. Montana | 8.3% |
| 3. Idaho | 7.1% |
| 4. Alaska | 6.8% |
| 5. North Dakota | 6.7% |
| 6. South Dakota | 6.1% |
| 7. Oregon | 5.8% |
| 8. Utah | 5.7% |
| 9. New Mexico | 5.2% |
| 10. Colorado | 4.4% |
Source: Diesel Technology Forum
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