Booming Exports Depend on Diesel

With trade and tariffs dominating the news, what does that mean for diesel vehicles, engines and equipment?

Diesel technology is a very high-value, export-intensive industry, and is also one that relies on imports. Whether it is truck engines or even fuel, U.S. manufacturers of diesel technologies help meet demand at home and abroad.

In 2018, the U.S. exported about $7.4B worth ($USD) medium and heavy-duty vehicles, according to the International Trade Administration; including $6.5B to NAFTA countries. From 2016, the U.S. has seen a 52 percent increase in global exports of these medium and large size commercial trucks. From 2017 to 2018, exports to Mexico were up 14.4 percent ($333.3B to $381.6). Nearly all heavy-duty and most medium-duty engines are diesel, owing to the fact that diesel is the technology of choice for global commerce, with ready access to diesel fuel and parts and servicing in most all corners of the globe.

Engines and engine components are sourced from regions all over the world to U.S. manufacturers, and then integrated into vehicles and equipment, some of which may in turn be exported to markets abroad.

For example, in 2018, almost 120,000 engines or engine components originating in the U.K. were used for domestic U.S. manufacturing.

U.S. manufacturers of heavy-duty vehicles and equipment take these engines and components, add value by transforming them into finished product, and then export them.

• According to research commissioned by the Diesel Technology Forum, $46 billion in diesel technology was exported from U.S. factories and refineries in 2010. Much of this export activity could not occur without imports. 36 percent of the value of domestic truck manufacturing is derived from exports.
• 18 percent of construction equipment and 22 percent of the value of heavy-duty engines is accounted for in exports.
• The value of diesel exports relative to domestic manufacturing is five times the national average. Achieving this high export-to-value ratio could not have occurred without imports.

Trade tariffs impact manufacturers of diesel engines and equipment in several ways. Many forged engine blocks and components are sources from outside the U.S. Tariffs on these imported components from Mexico or other countries raise the price of the finished assembled products for sale in the U.S. or for export. Ultimately, tariffs have punitive effects on trading partners, but mostly on consumers that buy products or those that work in the industries impacted by the tariffs, putting U.S. jobs and economic well-being at risk.

And then there is fuel. U.S. refiners still import crude oil, according to the U.S. Information Energy Agency. Refiners are able to take low-value crude oil and transform this into high-value ultra-low-sulfur diesel fuel, record quantities of which are exported to markets abroad, including the U.K. For example, during the last week of April 2019, 6.8 million barrels per day of crude oil was imported by U.S. refiners. These imports, along with domestic sources of crude oil helped refiners produce diesel fuel, including high-value diesel fuel, of which 1.3 million barrels per day were exported to markets overseas.

Since 2009, U.S. exports of ultra-low-sulfur diesel fuel grew by a factor of three, making clean diesel fuel one of the leading U.S. energy exports. 1.2 million barrels of this U.S.-refined clean diesel fuel made its way to the U.K. in March 2019. Trade means moving raw materials and finished products between buyers and sellers, country to country. While it very often takes an import to make an export, it also takes diesel fuel to move these raw materials, imported inputs and finished export products. Whether these products are moving by truck, train, barge or vessel, diesel technology moves 70 percent of the nation’s freight tonnage.

Ezra Finkin is Director of Policy for the Diesel Technology Forum.