At least once a year, I try to take the temperature of the emerging aircraft diesel engine market. What’s selling? Who’s buying it? How are they doing with it?A recent sweep through this topic revealed that in new airplanes, not much is selling at all, diesel or otherwise. (See the most recent GAMA production and shipment figures.)
With that established, shouldn’t the diesel conversions be doing a brisk business, especially since Continental recently raised the TBR on its CD line of engines to 2100 hours? Yes, but that’s not what’s happening. Conversions remain a lukewarm, low-volume market, despite demonstrated data that they deliver about 15 percent lower operating costs against avgas engines.
When I asked people involved with the conversions why this is so, the answer I heard consistently was that avgas is cheap. It is? At the moment, the average national price of avgas in the U.S. is $4.68, more than twice the average cost of autogas. Have you noticed? Do you care?
Irrespective of why diesels aren’t gaining more ground, I’m not so sure owners and pilots care that much about gas prices, with the exception of flight schools that use a lot of it. You can answer that for yourself in this week’s poll, but the overarching question is, do you consider avgas cheap? My answer is hell no, I don’t consider it cheap. But I do consider autogas to be cheap and, in fact, it is. In inflation-adjusted current dollars, the price of regular autogas costs about what it did in 1972 and is cheaper than at any time during the 1950s or earlier. The lowest adjusted rate occurred in 1998, at $1.48.
With gas so cheap, are you driving more? Personally, I’m not, because I’m not sensitive to autogas prices. Nationally, we are driving more, by about 2 percent, according to the Federal Highway Administration, confirming what you’d expect from standard supply and demand theory.
What about flying? With avgas so “cheap,” are you flying more? Do you care? I can find good data for avgas prices going back to the early 1980s, when it cost about $1.20. Adjusted for 2016 dollars, that’s about $2.60. The current U.S. national average is $4.68, according to airnav.com. So as with everything else in aviation, avgas prices have far outstripped inflation. Sometimes it makes me feel so special I could just weep.
But then I realized something. For much of the last decade, avgas has been in the high $5 range and $6 wasn’t unusual. Now it’s below that and has been for a while. Perhaps a certain psychological sense of “cheap” took time to seep in. If that’s so, wouldn’t we see increasing flight activity? Yes, maybe. But such that data is available to tell this story, it’s mixed. At AirVenture in July, the number of fly-in show planes, homebuilts, vintage and warbird airplanes all increased substantially over the previous year, despite worse weather. Whether a fluke or not, the numbers were as much as 11 percent higher. Fuel prices may or may not have been a factor. That these numbers didn’t decline serves as a victory of sorts, whatever the reason.
I’d like to correlate this with increasing fuel sales, but the data is murky at best. According to the Energy Information Administration, avgas sales plummeted sharply (after an equally sharp rise) in 2013, leveled off in 2014 and showed only slight decline in 2015. But a decline doesn’t support higher activity, unless piston airplanes have suddenly become more efficient, which we know they haven’t, Cirrus lean-of-peak notwithstanding. It’s possible that fuel sales have ticked up for 2016, but I’m not holding my breath that the data will confirm this. The data itself is iffy. There appears to be consolidation or retraction going on in the avgas refining business and for reasons related to proprietary considerations, avgas data is being withheld.
One anecdotal story: When I was interviewing sources for this, one owner told me he had flown his Cessna to AirVenture and back with a side trip out west. When I observed that the gas bill must have been substantial, he said something interesting. “You know, I really don’t want to know what the gas cost. I’m at a point in my life where I just wanted to make the trip, so I did.”
Because I’m an inveterate, dues-paying POW of the general aviation industry, I’m just self-delusional enough to weave that observation into a trend: pent-up demand! But seriously, if one guy feels that, others might too and it could account for increased flight activity. If the EIA gets it data collection together, we’ll know more.
Ample crude oil and refined product in the autogas markets appear to be tamping down prices and that’s likely to remain the trend for a while. Avgas has its own pricing psychology, but it’s sometimes linked—with an add-on margin—to the price of premium autogas. Its price is not strongly linked to the cost of production and thus crude oil prices.
Unknown is how the downward tend in fuel prices, however modest it has proven to be, will sustain itself when the replacement for 100LL surfaces two years from now. I was once confident that a market-competitive replacement would just naturally emerge because there’s money to be made in selling 250 million gallons of fuel a year. But with possible erosion underway in the avgas refinery business, I’m less confident of that now. It doesn’t help that the FAA’s cumbersome PAFI process is utterly opaque to progress. That may be the break diesel needs to become more attractive because one thing is certain: The world is swimming in Jet A.