Sun, Jul 13, 2014 - Page 14 News List

Refiners adjusting to surge in diesel car use in Europe

By Stanley Reed  /  NY Times News Service, LONDON

The body shells of Renault Captur compact sport utility vehicles pass along the production line at the Renault SA automobile plant in Valladolid, Spain, on Friday.

Photo: Bloomberg

At Dimitris Poliviou’s car repair shop, customers are increasingly turning up with diesel-powered vehicles.

“There are loads and loads of them,” Poliviou said as his crew in the Belsize Park neighborhood worked on a diesel Volkswagen Passat.

The statistics bear him out. Over the last quarter-century, European drivers have embraced diesel cars, as they tried to save money in a region of high-priced fuel. More than half of the new cars registered in Western Europe last year were diesel powered, compared with only about 1 in 10 in 1990. In comparison, only about 3 percent of new cars in the US are diesels, according to market researcher IHS.

That is why Exxon Mobil, the biggest US oil company, is trying to take advantage of the diesel boom to bolster its struggling European refining business. As fuel refining has eroded into a money-losing proposition for most European players, Exxon Mobil is making a contrarian bet, with a plan to invest more than US$1 billion in expanding diesel-fuel production at its big refinery in Antwerp, Belgium.

Steve Hart, Exxon Mobil’s head of refining for Europe and most other regions outside the US, said in an interview this week that the company was taking a long-term view in betting on diesel to reinvigorate its refining operations.

“If you look at Europe, demand for diesel continues to increase, and demand for gasoline is decreasing,” he said.

European carmakers like Renault and Volkswagen have responded to changing customer tastes with new diesel designs that have helped make diesel even more popular, through changes like adding turbo chargers to smooth acceleration.

However, fuel suppliers in Europe, because of the expense of converting refineries, have been slower to adjust. Many find themselves awash in gasoline, for which there is diminishing demand.

Hart also suggested that Exxon Mobil was considering diesel investments in other locations in Europe, where the company has nine refineries and is second largest in the industry, after the French giant Total.

From its network of refineries in northwest Europe, Hart said, Exxon Mobil will collect heavy fuels for which there is no longer much demand — like the so-called bunker used by older ships — and carry it by boat to Antwerp. There, a new refinery unit will distill the gooey substances into diesel and a similar lighter-weight fuel used by more modern ships. The company will then sell the diesel in northwestern Europe, which now imports large quantities of the fuel from the US, the Middle East and Russia.

Exxon Mobil is trying to catch up with a powerful trend that was initially encouraged by lower taxation on diesel cars and fuel, and then grew with big improvements in European auto design.

“People prefer the power delivery with diesel — they feel a lot quicker,” said Luke Madden, news editor of London-based Web sites Auto Express and Carbuyer.

Madden said diesel cars achieved substantially more miles (1.6km) per gallon (3.79 liters) than their gasoline-burning counterparts. That is particularly important in European countries, including Britain, where gasoline costs about US$8.50 a gallon and diesel about US$8.80, compared with about US$3.70 for gas and about US$3.90 for diesel in the US

Madden and Poliviou cautioned that diesels have drawbacks. For instance, diesel cars need to be driven regularly and at a fairly high speed to clean the filters that catch the soot and other particles their engines produce. In cars used only for stop-and-start city driving, those filters can gum up and cause problems.

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