As we pointed out last week, Toyota will be surrounded with competitors offering diesel engines by the fall of 2015 (estimated). Is diesel still the way to go with rising and fluctuating fuel prices? Maybe not.

One thing consumers hate is uncertainty. Diesel fuel fluctuates more than gasoline throughout the year. Right now, it is fairly stable. What happens when it steadily rises? Consumers will hate their diesel engine. Would you still buy a diesel Tacoma knowing this?

Seasonal, Global Demand Spurs Price Increases

Diesel fuel has largely been thought of as the fuel choice in Europe and commercial-vehicle only fuel by U.S. consumers unaccustomed to using it. The truth is generations have passed since some people have used the fuel in their personal vehicle. This time passage has created a “grass is greener” mentality among consumers.

The fact is diesel fuel is better for low-end torque and it provides better fuel economy. However, it is also subject to massive and, often, odd price increases. Why?

“The price of diesel is a mystery to many people,” said Allen Schaeffer, director of the Diesel Technology Forum as quoted by the Detroit Free Press.

Diesel fuel demand and fuel price is a by product of:

Increase in the amount of diesel-powered vehicles – 3% of the market currently, expected to hit 6-9% by 2020.

European market of nearly 50 percent diesel powered and expected to grow.

Developing countries increasing demand for diesel.

Ships demanding more diesel for larger vessels and engines.

Farmers driving up the price during planting and harvest times of the year.

Also, taxes on diesel fuel are about 6 cents a gallon more nationally. One-third of U.S. states also levy an additional tax. Politicians raised this tax back in the early 1990’s when diesel fuel was a quite a bit lower than gas. Plus, diesel fuel taxes affected businesses largely and not consumers. This made it easier for politicians to raise them.

These factors lead to diesel selling for $119 to $130 per barrel in the last quarter of 2013. Gasoline was selling for as low as $99 a barrel.

Add in additional U.S. vehicles running on diesel and the supply drops even further. Prices seemingly are set to raise.

Diesel Supply Rising

Not to fear, diesel fuel supply is rising as well. Refineries are working on producing more of the fuel to try to keep up with demand. Plus, it is more profitable for the refineries.

Tom Kloza, chief oil analysts for Gasbuddy.com, told the Detroit Free Press U.S. oil refineries are investing aggressively to produce more diesel. They want to meet rising global demand and make more money.

“Diesel is the product refineries want to make,” Kloza told the Detroit Free Press. “It’s more steadily profitable than gasoline.”

Diesel fuel isn’t as refined as gasoline is, thus it is cheaper to produce. Add this together with the higher per barrel price and you have a very profitable product for them.

With refineries producing more diesel fuel, Bank of America is projecting it will be the main oil fuel for many refineries.

Diesel-Powered Tacoma, Good Buy?

Increased supply is great, except when demand is outpacing the supply. With global demand rising and more diesel-powered vehicles on the road, diesel prices could keep out pacing gasoline. Last fall, the price difference was nearly $1 nationwide according to AAA.

This may be OK for truck buyers who see a large difference in fuel economy between a diesel and gasoline powered truck, but what about a smaller, mid-size truck? The MPG difference may simply not be there.

Currently, we don’t have any hard numbers on what a diesel-powered GMC Canyon or Chevy Colorado will achieve versus an equivalent gasoline. We do know, a Ram 1500 EcoDiesel gets 18/28 City/Highway while the Hemi V8 gets 15/22 and the V6 gets 18/25. Essentially, you are really only getting 3 MPG better when driving highway. And that is on a larger truck.

The truth is a diesel-powered Tacoma may sound great at first glance. Yet, when you consider fuel differences growing beyond $1 a gallon and just a few MPGs different, it isn’t so great.

What do you think? Are diesel fuel fluctuations a concern?