Over the past few years we have all been encouraged to insulate our homes. Thanks to a variety of generous grants, lagging the loft and hot water tank has probably never been cheaper. A vast proportion of us have replaced old doors and windows with double or triple glazed alternatives and as a result we should have noticed our fuel bills drop as we bask in our new toasty warmth. I say should because unfortunately recent price hikes have probably ruined how we estimate our yearly fuel costs. No sooner do you seem to be calculating how much to put away than another 10 or 15 per cent hike is announced.

But what if the government decided that they were now going to specifically tax homes that had double glazing? That householders would be penalised for having loft insulation, have their council tax increased by double figures if they were discovered to have cavity wall insulation and a jacket on their boiler? In effect, punished for trying to be green?

This is obviously not a real world scenario, but is it so different from the situation that owners of diesel fueled cars currently find themselves in?

Not so long ago diesel was significantly cheaper than petrol at the pumps, and there was real encouragement for drivers to make the switch from petrol. In the space of just under 10 year’s sales of diesel cars have risen to the point that they now account for just fewer than 50 per cent of all new cars sold. Thanks to stunning developments in diesel engine technology, manufacturers have all but buried the old criticisms of noisy engines, black smoke and poor performance. The owner of a diesel car today can look forward to better economy, lower emissions, good performance and stronger residuals. It's also greener than petrol. So why can't we also add 'cheaper fuel' to that list of positives?

Analysis by EurotaxGlass’s has revealed that the typical three-year-old used diesel car will now need to be run for a further seven years before the financial benefits outweigh those of a comparable second-hand petrol model.

They found that the average three-year-old mid-sized family diesel car currently costs between £600 and £800 more than its petrol counterpart to buy, but the annual fuel bill is currently only £105 less. Only after seven years will the lower fuel bills compensate for the higher purchase price. Annual fuel costs for a typical three-year-old diesel car currently stand at £1,373 – up 25 per cent, or £273, over May 2007. For the equivalent petrol car, fuel bills are now £1,478, up 15 per cent, or £186, compared to May last year.

“As well as the prospect of lower fuel bills, some consumers are attracted to used diesel models in the expectation that depreciation will be lower compared to an equivalent petrol car,” explained Adrian Rushmore, Managing Editor at EurotaxGlass’s. “...if the average three-year-old used car was retained for seven years in order to make the most of the lower fuel prices, the premium over a petrol model of the same age might, by then, only be around £100.”

The used car market has not yet had time to react to the dramatic year-on-year increases in fuel costs, but the view is pessimistic. “Our view is that rising fuel costs will bring a further acceleration in the depreciation of fuel inefficient cars," said Rushmore, "although some highly aspirational sports models may not suffer to the same degree."

“While there is nothing to suggest that prices of used diesels are falling faster as availability increases, clearly the broader financial argument for diesel ownership is becoming less persuasive. For diesel cars to remain in favour, they may need to rely more upon driving characteristics rather than any compelling financial considerations.”

We hear a lot about oil production, along with supply and demand, but the real crux of the matter seems to be the taxation on the fuel. I feel sorry for the diesel motorist. A hard sell was made on how much cheaper it was to run a diesel car, with lower fuel costs and greater economy. Back in the early nineties I can recall doing the maths and discovering that although a diesel car might be more expensive, if I traveled more than 22,000 miles that year (an awfully low estimate as it turned out) I would be saving money.

When diesel seems to tick so many boxes of the environmental lobby, as well as offering more economy and savings for so many people, then why aren't there more incentives for us to take up the challenge and make the switch? A reduction of tax on diesel, lower road fund licences, cheaper insurance – any number of options are possible, but if the Government is serious they should make the oil burner really financially attractive to own. Mind you, even if they did, people may not adopt diesel with a fervour. Once bitten, twice shy?

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