Hi and welcome to Ones and Twos, FP's economics podcast. Every week we take a couple of data points and use them to try to explain the world. I'm Cameron, FP's deputy editor, with you in Berlin, Germany. Joining us as always is FP's economics columnist and Columbia University professor Adam Tooze in New York. Hi Adam.
So we actually have one data point for you all this week. It's a broad subject. We thought it could be a standalone episode all its own. And the data point is $6.43. That is the price per gallon on average across the United States of diesel. Now, that is a lot more than it used to be. In January 2025, the same gallon of diesel cost $3.69. That is the American number obviously, but the same pattern goes for Europeans and the rest of the world. In Europe specifically, governments are trying to combat that surge in diesel price with various kinds of tax relief schemes or other subsidies, including in Germany, but also Spain, etc. But more generally, diesel is a fuel that often gets neglected in public discussions in the United States. Diesel is the fuel that moves tractors and harvesters and ships and trains around the world. And so it's not always just the kind of motorist at the pump who is complaining when the price goes up, but the effects are very real. And the surge in the price has to do with many factors including the Strait of Hormuz traffic that has been disrupted as a result of the Iran war, but also, you know, the campaign against Russian refineries that Ukraine has been pursuing. And a lot of these factors, including those two I just mentioned, have to do with one, Donald Trump and the administration in the United States. So even though American drivers are not affected as much by the diesel price as others around the world, they are certainly, you know, indirectly responsible for the problem and also suffering the consequences in other indirect ways. So Adam, to start off with, maybe a very basic question, but what is diesel exactly? I mean, on some chemical basis, we're talking about a fuel that is different than petrol or benzene that is often used in cars in the United States. But yeah, what makes diesel distinct as a fuel?
Yeah. So in the process of refining oil, which we're all getting familiar with as a result of this crisis, it does feel like Donald Trump's foreign policy is God's way of teaching us all chemical engineering. You basically cook the heavy oil and as you cook it and warm it up, different fractions of the oil come off in the refining, these tall towers they have, right? And there's very light gases that come off first because they evaporate off the heavy oil first, and then you get regular benzene petrol, and then lower down you get heavier products, bigger molecules basically. And at the very bottom you get something that's basically tar and is used in, you know, road making, road surfacing. But in the kind of middle tier you get heavy molecules with lots of carbon atoms in them which are still in various ways easily combustible. Not quite as prone to combusting under ignition as petrol, but nevertheless combustible. And diesel is a cocktail of these kind of ingredients in the middle range of the refining stack. So I'm not a chemical engineer, so, you know, may the Lord forgive me for what I'm about to say, but it's got like 10 to 20 carbon atoms, so many more than regular benzene. And it's generally mixed in the cocktail that's actually used in modern diesel fuel with paraffins, with naphthenes, with aromatic hydrocarbons. And these are all, you know, what makes up the diesel product. You see it, it's much more oily than regular fuel. I mean, regular fuel is kind of terrifyingly feels light, right? If it splashes on your skin, diesel is oily. And the crucial difference is that what you want petrol to do is to take compression in the engine but not ignite. So this is the famous knock property. So you want the engine to be able to squeeze up with the piston up against the cylinder head for the fuel and gas mixture which you've injected to not ignite until you use the spark plug. Whereas the thing with diesel is that you want it to spontaneously ignite in hot air, which is to do with the design of the diesel engine, which we'll say much more about in a minute. But the chemical properties of these two fuels as they emerge from the refining stack, as it were, mesh with two different designs of engine. So it feels different. It smells different. It doesn't evaporate as much as petrol because if you have a splash of petrol anyway, the whole place will stink of the petrol. Diesel is quite different than that. And crucially in terms of the way in which it fits with an engine design, they burn in completely different ways. Petrol needs a spark and diesel will go when it's in hot air.
Yeah. You mentioned the engine and I was interested to learn that, you know, the engine in some sense, the diesel engine that is, was from what I could tell in reading about it almost primary in the development of diesel as a fuel. And it all goes back to the namesake of diesel, namely one Rudolf Diesel, who was an interesting figure in his own right, had an interesting, you know, in some respects strange life and also a mysterious death. So I was curious if you could talk a little bit about Rudolf Diesel and then, yeah, how he came to develop the diesel engine and how that led to the development of diesel as a fuel exactly.
Yeah. He really should be an absolutely classic figure of the, you know, what some people call the second industrial revolution. So not the pioneers of the first industrial revolution in Europe and not coming out of Britain, which is where that was largely centered, but out of continental Europe, like a Siemens or a figure like this in electrical engineering or the famous German chemical engineers around BASF and companies like that that go on to form IG Farben. His family is Bavarian, but they were in Paris when he was born in 1858. Then because of the Franco-Prussian War in 1870, his parents go to London. So they're peripatetic Germans, but young Rudolf is sent back to Augsburg. And so he becomes from the 1870s onwards part of this protein mixture of German engineers that, you know, Daimler and Benz come out of that, make the petrol engine and the car. And the thing that they're all working on really is what comes after the steam engine because the steam engine, you know, is the transformative prime mover of the 19th century, but it's very inefficient and it runs on very low energy. You know, coal is relatively low energy content by comparison with other possible fuels. And so the resulting power is awesome and it changes the world, but it's inefficient and it's incredibly heavy. And so the engines are, and you have to carry vast amounts of coal. So there's a whole generation of engineers who are investigating other options. And whereas Benz and the internal combustion, what we think of as the standard four-stroke engine, go towards this idea of injecting an emulsion, a cloud of air mixed with petrol and then igniting it with a spark plug. Diesel realizes that if you compress air, the extraordinary thing is it generates heat, right? The compression generates enormous heat in the air. So you don't really need a spark plug. If you have a fuel type which when it's injected into the hot air will spontaneously combust. And were it to do so, it would produce a much more uniform flame. The problem with a standard internal combustion engine is you've basically got a cloud of petrol in air and then you ignite it. And so you get an uneven spread of the flame. So then there's an awful lot of fancy engineering, I used to be totally into as a kid, about how you design that combustion chamber and where the air-fuel combination comes in and how you maximize the air-fuel combination. All of that disappears with the diesel because you're just going to compress the air and inject the fuel into the right place. And the beauty of that is several different things, but one crucial one is you can make the engines really, really big because you can control the way in which the combustion takes place because it's going to be uniform across the chamber which you've compressed because the air pressure and the air heat will be the same across the entire chamber. Whereas with a standard internal combustion engine with a spark plug, you've got one flash and then the flame has to spread, microseconds of course, but nevertheless in terms of the efficiency of an engine, as the cylinder gets bigger and bigger, that gets more and more problematic. So you can't make super, super big regular internal combustion engines. Whereas you can make diesel engines which are the size of houses, the ones that drive giant ships. Now if you make them that big also, then there's another problem which is that conventional internal combustion engines, everyone will be familiar with the sound, every kid learns it, go like this, change gear, and what you're doing there is speeding the engine up. And, you know, high-powered internal combustion engines will rev to five, six, seven, eight thousand revs per minute. So they're going around like absolutely crazy, you know, several, you know, dozens, twenty, thirty times per second. So the crucial thing about them, and they have to be small, they have to be light because you can't have revolving masses going that fast. But the diesel has this property that the flame is very uniform. You get very, very large amounts of torque from these engines at very low revs. You can build gigantic engines which in ships will rev, you know, not at ten thousand times per minute but maybe only a hundred times per minute. So a hundredth of the speed of revolution. And that means you can make them absolutely massive because you're not going to tear the ship apart by revving up this giant, you know, multi-ton piston to ten thousand revs, which is what would happen. So the diesel has this set of properties which make it the ideal replacement for the steam engine. Really, if you think of the standard petrol engine doing something different than the steam engine, you would never really think of it. But the diesel literally replaces steam on ships, on boats, on railway, in heavy traffic, for any heavy or ideally stationary engine, diesels are ideal. And so they've always had a niche over the course of the 20th century. And even in societies which otherwise are completely wedded to standard petrol-driven internal combustion like the United States, as you were saying early on, all of the heavy rigs are driven by diesel. Every single one of the big ships, which America of course doesn't build, but were it to be building them, all the stuff that America imports comes on diesel-powered ships up to this point. So diesel had this sort of checkered career, but it wasn't a great success. And we think ultimately that then bleeds into his death because it was a niche product. It didn't become, you know, didn't drive Henry Ford's Model T, the diesel engine. It became an industrial engine. And so in 1913, he's on a business trip from Europe to London. He's on the liner the Dresden, and one night Diesel, you know, well-dressed gentleman, takes himself off to his cabin and he's never seen again. His hat, his umbrella apparently are all laid out neatly on the bed. There's no message. And a couple of weeks later, a decomposed body is fished out of the North Sea, which his son apparently identifies. And forever after, rumors have sort of circulated that maybe this was foul play, that this was German or British intelligence that were trying to eliminate diesel because one of the applications for his engines would be submarines. So the big dreadnoughts, the giant battleships, use another technology again, which is turbines, but the submarines, you know, in a submarine there's always this charge between electrical batteries and diesel operation. They all ran on diesel. And so he may well have been a target, but the most likely explanation is simply that he was a, you know, disappointed man who had made this really quite fundamental breakthrough. And engineers are agreed that this is an inherently more efficient type of engine, and yet was facing really serious business difficulties and may simply have chosen suicide.
Yeah, there were these other theories, although it was officially ruled a suicide as you alluded to. Some suspect that he was on his way to meet the Royal Navy to perhaps suggest adopting his engine and that then maybe German agents eliminated him, so to speak. And then there was one theory I came across that some suspect kind of big oil, essentially associates of Rockefeller's Standard Oil or other big tycoons, also may have had him eliminated because they thought of his engine precisely as more efficient and perhaps a threat to petrol consumption.
Exactly. So he may have been a victim of a big oil assassination. Who knows? We'll never know, I suppose.
But maybe just to clarify one point because you're describing, I think very aptly, why the fuel is suitable for heavy continuous work, but are there downsides to the fuel? I mean, with respect to benzene or petrol, like what is the weakness of diesel compared to normal petrol?
I mean, it's noxious. [laughter] It produces really toxic NOx, so really toxic gases, and because it's efficient you use less oil. So there's always been an argument, and this is key to why diesel came to be adopted quite extensively by Europe from the 1990s onwards. But it does produce really poisonous gas fumes. I mean, if anyone, if you've ever stood next to a truck, you know, I mean, it's disagreeable. And the engines themselves in their early iterations were suitable for heavy work but not for high-revving, high-performance, maximum performance. So growing up as a, you know, engine-obsessed kid as I did in the 70s and 80s, diesels for me were the stuff of the devil and they were these grunty engines that were used in incredibly boring applications, whereas, you know, anyone that loved motor vehicles was obsessed with very high-revving, schnell, very high-revving internal combustion four-strokes or two-strokes even in motorbikes, which is another engine design which uses again a different fuel mix and dispenses with valves, that generates minimal torque. So two-strokes, minimal torque, maximum revs, four-stroke, standard engine in between, and diesels at the bottom end. And there's a really interesting story about how that shifted from the 90s onwards, actually, particularly in Europe.
Yeah, let's turn to Europe because obviously Europe does rely more on diesel than the United States, for example. So what is the story behind that? How did Europe become such a diesel continent?
This is the thing about technology, and this is the essential point to make. And I, you know, I made the point a little flippantly a minute ago saying that, you know, as somebody who was obsessed with internal combustion engines, I didn't like diesels. I mean, entire engineering teams, entire businesses, entire industries and huge corporations are orientated around technologies where people make investments, like the difference between Android and Apple or, you know, open source, non-open source for AI. Same for internal combustion engine and mechanical engineering. And in the US really for standard, you know, passenger vehicles, and in Japan as well, the standard is really the internal combustion engine. In Europe, there was always a branch of standard passenger vehicles that were diesel. Mercedes-Benz in particular, but only about 10, 11% of European cars, passenger cars, were diesel in the late 80s. By the early 2010s, it's over 50%. So it's a huge transformation, far more dramatic than, for instance, the shift to hybrids, let alone electric vehicles so far. So the diesel shift is an energy transition in Europe engineered by companies and governments from the late, early 80s, early 90s onwards towards a technology, completely different engines, the whole different design, they do have gears, so unlike electric vehicles, but it's, and you could say the tragedy of the European car industry now is that they made this shift into diesel and didn't go down the hybrid electric vehicle route, Toyota, Tesla, BYD, which is why they're in the trouble they're in right now. So this is a really, it's a momentous story and we think it's essentially a combination, a rather kind of perverse combination of business interests. Several of the European producers had very strong diesel development and then rapidly improved the diesel. So the diesel became a viable option even for small, for hot hatches. You could have a turbo diesel that was very, very efficient. And so they were a good proposition. You add a turbo and then you add what's called rail fuel injection, which allows you to dose the fuel injection per cylinder incredibly carefully. So it's super efficient. It's the ultimate development of internal combustion engines. And that was one line. So that was an argument and it was a technological advantage and it helped to secure European dominance actually in automotive technology by the 2010s. Then there was the interest of the European Commission, which was in cahoots with the industry but also had concerns about emissions and didn't yet see the possibility of EVs. So thought, right, the way to go is simply the most efficient internal combustion engine we can get and that will be the diesel, and so pushed regs in that direction. The industry eagerly cheering and going, yes, yes, yes, that is the way we should go. And then the third element is the European refineries who would love to see the development of a market for this midsection of the refinery stack, because refinery, we'll say more about it in a minute. You know, you don't, you can get a choice, a barrel of oil is a barrel of oil and you can break different things out of it and you can mix those ingredients to produce different cocktails, but there's a finite number of cocktails you can make out of a barrel of oil. So once you've started refining the barrel of oil, your question is where do you find the market for the different bits in the oil? And diesel is great because it takes the bit that's heavier than petrol and lighter than the fuel oil that you use in houses that's really like porridge or something like that. It takes that segment and provides a market for it. So everyone was happy and the, you know, the nightmarish result of this is the Dieselgate scandal where, you know, the VW engineers were trying to convince everyone that you could have a car that was the most efficient and the cleanest and didn't even produce any, you know, a truly toxic NOx pollution and just basically fudged the results to produce that outcome. And now the competitive disaster of having totally lost the plot to the EV, the battery EV model which the Europeans just sort of sniffed at in the 2010s because turbo diesel was so much more attractive. But it's a historic turning point and it should be, it's a little bit, I would put it up there almost with like nuclear policy in the 70s and 80s. It was a turning taken by a combination of different interests which has had really long-lasting consequences. I mean, the engines are astonishing from the point of view of efficiency. They can run a small car, you know, for 100 kilometers on, you know, like a milk carton worth of fuel. So it's, you know, a passenger car with four people and a dog and, you know, suitcases and you can run it for 100 km on a small milk carton, but it's a technological dead end in the end compared to battery electric.
Hmm. Yeah, that makes me wonder why the resulting cars that run on these various types of engines themselves don't look more different than one another. I mean, if the engines are so kind of fundamentally different in terms of their capabilities and their strengths and weaknesses, the outside of the car, as though from the outside, they all very much look the same.
Oh, so we should do it. You know what? Why we haven't done a Ones and Twos on aerodynamics. We should do a Ones and Twos on aerodynamics. I mean, what shapes the outside of motor vehicles and why they all now look exactly alike is aerodynamics is all about drag reduction because beyond a certain speed the power demand goes up exponentially because of drag. And so if you can reduce drag you can enormously reduce power demand. And if you reduce power demand you can increase efficiency. Not that you'd think that was actually going on right now because the cars have just gotten heavier and more and more powerful. But the way in which they help manage that and reduce emissions and consumption all the while making them heavier and more powerful is by optimizing aerodynamics. So that's why they all look the same. But, and none of these packages are so big that they would, you know, they would break the shape of a conventional vehicle. You know, where they really do look different is in a truck or where in a heavy application. Those engines, I do not exaggerate, are the size of small houses. So a maritime diesel engine is several stories tall and they are really like, you know, you can go see them in industrial museums. They're like old school steam engines. That kind of rhythm, you know, whereas the high-revving engine is like an instrument. It generates harmonics. It's going, you know, it's that sound that they make. The racing engines, 16,000 RPM, 10 cylinders. They're like a, you're shaking the air so dramatically that you create this cloud of sound. So they're completely different objects.
