MOTORING: Diesel cars lose market

MOTORING: Diesel cars lose market

But diesel could see even higher demand

kampala, Uganda | MOTORING GURU | You have always eyed the BMW series but could not afford it because, well, it comes at a price. So when you heard of the growing unpopularity of diesel cars in the UK where the BMW is the most favoured car by corporate executives, you thought you could finally ship out a used one.

You thought a good deal was certain because the Japanese car giant Toyota had just ratcheted the diesel car market woes with an announcement this May that it will no longer sell diesel cars to customers in Estonia, Latvia, and Lithuania. What sounded like another death knell follows a trend of drivers rejecting diesel cars in Europe over environmental concerns, backed by stiff new taxes on diesel and proposed bans of older models in some European cities.

Sales of diesel cars in the UK fell close to 40 per cent year on year in March, maintaining a for 12 straight months decline, and dragging overall new vehicle sales down 16 per cent during the most important month in the automotive calendar, according to the Financial Times. The declining trend has been seen in markets as diverse as the U.S., Germany, and India. The trend led one cheeky writer in Down To Earth Magazine to write this headline: “Diesel cars: Market shuns the Devil’s engines”.

But the windfall that you and many used car buyers in Uganda, and Africa generally, might have been hoping for as a result of more shipping out due to their declining popularity in Europe will have to wait. Latest reports in British newspapers from Auto Trader, which lists about 500,000 cars every day on its market place, say diesel prices are holding steady.

Toyota cited an increase in the popularity of the hybrid for its decision to discontinue offering diesel engines for private cars. Apparently hybrids are perceived to be convenient, simple to maintain, reliable, and silent. The Toyota hybrid does not have to be charged from a plug, it has an automatic gear box, low maintenance costs, and a high residual value.

And there is more bad news – this time from the diesel market itself.

The Financial Times of London reports that the backlash against diesel in the developed world masks a wider trend in oil markets. It says diesel, rather than sputtering, has been roaring and notes that some oil traders and analysts are now even warning that supplies of the fuel could become uncomfortably tight this mid-year.

The FT says diesel markets have remained strong despite the negative headlines because it remains the fuel most closely associated with global economic growth. Freight hauling trucks, ships, and aircrafts use diesel. Same goes for construction firms, miners, and oil producers around the globe.

With the world economy ticking along at a pace not seen since the financial crisis, it’s perhaps not surprising then that diesel markets have tightened, the FT says. Demand for the fuel globally was 750,000 barrels a day higher in February than the previous year, according to Energy Aspects.

But demand, the FT says, is only one part of the story. Supply may be what oil traders really have to watch. Although diesel markets this decade have generally been marked by ample supply after a slate of hi-tech refineries geared towards maximising diesel production came online in India and other developing countries, global oil demand has grown rapidly since 2014.

“We may be starting to see the early signs of strain in the global refining system as demand roars ahead,” the FT says. If relatively new sources of crude supply cannot be easily refined into the volumes of diesel the world needs, a bigger problem may appear on the horizon.

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