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Diesel fuel prices are down and the competitive herd of diesel auto makers in North America is thinning, so this may just be the right time for German car makers to push their expertise in fuel-efficient and now relatively clean diesel engines.

And so they are. Carefully. At least in Canada.

After all, as the Ontario government made very clear in its recently announced electric vehicle subsidy program – up to $10,000 in rebates to buyers of electric vehicles starting next year – diesels are not in favour.

Elected officials have apparently shown that they are perfectly happy to pick technology winners and losers in the auto industry. Their bias: electrics.

The politicians have another little regulatory trick that reflects their anti-diesel bias, too. Under fleet average standards for corporate average fuel economy (CAFE) and CO{-2} (carbon dioxide), vehicles are certified using a 35-year-old test weighting of 55 per cent city and 45 per cent highway driving.

This might seem innocuous, but it's not.

Diesel vehicles that perform very well at high-load and high-speed driving – commuting and freight hauling, in other words – are penalized. But vehicles that perform well in stop-and-go driving, like hybrids, are well rewarded.

In the face of subtle but clear political opposition, Audi, BMW, Mercedes-Benz and Volkswagen have all taken a relatively low-key approach in launching new fuel-efficient and relatively clean diesels.

Last year, Volkswagen released its cleaner Jetta TDI diesel and ended up winning the Green Car of the Year award in the United States. But the Jetta TDI has a ready-made fan base in Canada, so VW Canada really needed only to start handing out keys to buyers anxious for the latest diesel from Wolfsburg. No advertising needed and barely any effort on the public relations front.

Then in the fall Mercedes made a modest push to create buzz around its new BlueTec diesels, from the E320 to the three diesel SUVs, the ML, GL and R-Class. BMW has since launched two diesel models, the 335d sedan and the X5 xDrive 35d SUV. And now Audi is rolling out the Q7 TDI.

All the German makers, obviously aware of government sentiment and cautious not to overplay their hands in the eyes of policy makers, have been relatively low key in their launch efforts.

This is in sharp contrast to their American counterparts. Down south, Audi has unleashed an in-your-face marketing push that combines aggressive advertising with behind-the-scenes lobbying and PR efforts.

Just before the big U.S. July 4 holiday, Audi unveiled a new ad slogan: “Diesel. It's No Longer a Dirty Word.” While underscoring new technologies that have gone a long way to clean up diesel pollution, the core of the ads is an appeal to American fears about energy security.

That is, the ads point out that if one-third of Americans drove “clean diesels,” the United States would shave 1.5 billion barrels of oil from the massive oil imports coming from places like Venezuela and Saudi Arabia. In fact, the U.S. imports about 1.5 billion barrels daily from the Saudis – and about 1.6 billion barrels from Canada.

Meanwhile, Audi of America has been quietly holding roundtables for various public policy influencers with an eye to building the case for its new, improved diesel technology. And Audi has also mounted a campaign using social networks like Facebook to get its diesel message across. Others are following suit.

But in a world where gasoline-electric hybrids and pure electrics seem to be the politically correct choice, the diesel push – no matter how aggressive and how well considered – may not have legs.

Global Insight's John Wolkonowicz, senior market analyst at the consulting firm's North American Automotive Group, says fuel economy rules – CAFE – that call for all vehicles sold by any one manufacturer to achieve an average of 6.67 litres/100 km (35.5 miles per gallon) by 2016 will spark technological change and electrics and hybrids will dominate.

“The winning technology in all this will be hybrids in all shapes and forms. It won't be the diesel because of concerns about carcinogenic potential of soot, and the price of diesel is likely to remain volatile into the future,” he says.

Wolkonowicz says that by 2016 at least half the vehicles sold in the United States will be some sort of a hybrid. The bulk of sales will be mild hybrids along the lines of the current Honda Insight.

Tracy Harder, another Global Insight analyst, adds that all this is bad news for diesels.

“It looks like diesel is the loser in all this,” says Harder. “We have brought our forecast for diesels in 2016 down to about 10 per cent from 15 per cent.”

So diesels are unlikely to ever be as popular here in Canada and the United States as they are in Europe, where diesel accounts for almost half of new-car sales. But then politicians in the European Union tax regular gas more than diesel to encourage people to opt for the latter.

The idea behind the tax scheme has been to shift the market to diesels, which get about 20 to 40 per cent better fuel economy. This is how EU countries have cut fuel consumption and driven buyers into largely smaller vehicles.

Ironically, fuel economy regulations may yet give life to diesels in Canada and the United States. Ottawa, following Washington's lead, is putting in place CAFE rules that will require all vehicles sold by any one manufacturer achieve an average of 6.67 L/100 km (35.5 mpg) by 2016.

Low sulphur diesel fuel and various pollution traps, emissions treatments and other technologies have cleaned up diesel exhaust dramatically. What comes out of the tailpipes of today's cleanest diesels is as clean or cleaner than what you get from regular gas vehicles. Audi, BMW, Mercedes and VW are anxious to get that message out – along with reinforcing the fuel economy benefits of diesel.

At the same time, these companies want to clear away the not entirely uncommon perception that diesels are smoky and stinky. To many consumers, that's what a diesel is.

Meanwhile, hybrid and electric technology has a clean halo to it – so clean, politicians such as Ontario Premier Dalton McGuinty are using taxpayer money to back the electrification of the vehicle fleet.

That is, Ontario has announced a rebate program with the goal of making one of every 20 vehicles on the road a plug-in hybrid or battery-powered car or truck. Many provinces, including Ontario and British Columbia, already subsidize the purchase of hybrids with tax rebate schemes.

No such subsidies exist for diesels, no matter how advanced their emissions systems. And that surely helps explain why a handful of mainstream car makers have put the brakes on nine diesel-powered vehicles that had been scheduled for 2010.

Honda, Chrysler, Ford, General Motors, Nissan and Toyota have all halted diesel programs. The global recession is playing a part here; all auto makers are working hard to preserve cash and rein in development costs.

But the political climate also weighs on their decision making. And that climate in part explains why all these auto makers are banking heavily on hybrids and electric vehicles.

The German auto makers, however, already sell diesels in great numbers in Europe. That volume reduces development and production costs per vehicle.

Even at that, a diesel can add $3,500 and $9,000 to a vehicle's price. The costly components include the turbocharger, the high-pressure fuel injection system, a diesel particulate filter and the complex emissions system filled with precious metals.

Just one part of some diesels' emissions system – urea injection – can add more than $1,000 to the cost of the vehicle. VW and its Jetta aside, all that added cost seems to be a barrier for mass-market sales of diesels.

Thus the vast majority of new diesels being launched in Canada are premium models like the Q7. Audi and the others not only push the fuel economy benefit, but also underscore the performance of diesels – the torque or twisting force supplied by diesel engines. Diesels are not only fast and powerful, they are superb for towing.

That means most drivers who try out the new diesels will find them not just quiet, but more powerful from the starting line, faster at passing and, all in all, more like a “normal” car.

Meanwhile, the auto makers and suppliers with heavy diesel investments are attacking the cost problems and their efforts may prove successful at reducing the need for highly expensive components.

For instance, by reducing the amount of oxides of nitrogen (NO{-x}) produced in the engine, manufacturers would need smaller amounts of expensive precious metals in the emissions system. That would save money, as would standardized parts for larger production runs. As volumes go up, costs go down.

Some experts suggest the day will come when manufacturers will be able to sell vehicles with six-cylinder diesel engines that deliver the performance of a large gasoline V-8 at about the same price, using less fuel.

The last wild card in diesel story is the cost of fuel. Over the last 12-18 months, it's gone up and down like a yo-yo – especially in the United States where tax and supply system issues make the pump price of diesel highly unpredictable. In the absence of clear, comprehensive energy policy in Canada and the U.S., diesel and other fuel prices are likely to remain volatile.

Still, right now diesel fuel is a bargain in Canada. According to the weekly Pump Price Survey by M.J. Ervin and Associates, a litre of automobile diesel last week was selling for 85.9 cents, versus 92.9 for a litre of regular gas.

Despite the political bias against diesels, cheaper diesel fuel, significant fuel economy gains, cleaner diesel technologies and superior performance make today's new diesels at least an interesting alternative, if in most cases a pricey one.