The green lobby may not be happy but for many businesses and individuals, the best economic news for ages was the drop in the price of diesel

For many businesses and individuals, the best economic news for ages is the huge drop in the price of diesel. It is now under 113p a litre and, according to the AA, cheaper than petrol for the first time since 2001.

The green lobby is not so happy, however. You may have noticed that a curious diesel scare story is abroad, with the media reporting that diesel cars “cause” or are “linked to” 29,000 deaths a year. Islington council in London is forcing owners to pay a £96 surcharge for a parking permit and what starts there will likely catch on in other go-ahead boroughs like Brighton, Camden and Bath. Having spent 20 years encouraging us into diesel cars, it seems the authorities now want to get us out of them.

What are we to make of all this? As usual when it comes to energy, the answer is a fascinating cocktail of international politics, innovation and disinformation. Let us start by clearing up a common misconception, that a barrel of oil can be refined either into petrol or diesel. This is incorrect. They are both produced simultaneously in a fairly fixed ratio during the process. Gasoline is a lighter distillate, produced at a lower temperature and diesel is a middle distillate, which emerges at a higher one. According to the US Energy Information Administration, a typical barrel of oil is refined into 13 gallons of diesel and 19 gallons of gasoline.

Attempts to force drivers to adopt one fuel or the other are nonsense. Making everybody buy gasoline will cause the market to be flooded with another by-product of the refining process, diesel, and vice versa.

So, why is diesel suddenly so cheap? Oil traders say that the causes are threefold. First, the Saudis have moved into refining in the past year and two massive new refineries at Yanbu on the Red Sea and Jubail on the Persian Gulf are sending tankers full of diesel to Europe. Second, the US economy is going like the clappers and as Americans prefer petrol in their pick-up trucks and SUVs, the world is awash with unwanted US diesel. Third, the oil price is anyway very weak, Brent crude is below $50 a barrel, due to surplus production combined with speculation that the possible lifting of sanctions against Iran by the US will allow Iranian exports to surge. The Iranian oil minister Bijan Namdar Zanganeh has said Iran could boost exports by 500,000 barrels a day almost immediately, rising to one million barrels a day within a month.

Is it true that diesel causes 29,000 deaths a year? This is a second bit of nonsense. The number originates from a report in 2010 from a quango called the Committee on the Medical Effects of Air Pollutants. It estimated that if all man-made particulates were removed from the atmosphere, we would live an average of six months longer, or 29,000 fewer of us would have died in 2008.

Summarising or criticising a report of this nature is a dangerous business, so I am grateful to the attempt made by a blog called Transport Watch UK. It is impossible to isolate accurately the effect of particulates on individuals from other factors, such as lifestyle choices, genetic predispositions and so on. For instance, anybody with a respiratory condition living near a pollution blackspot should surely move house or give up smoking. It is, anyway, the case that only about one tenth of particulates are caused by road traffic.

In a separate report, the committee indicated that removing particulates caused by local road traffic would increase average life expectancy by 16 days in England and Wales and 41 days in Inner London. The committee rightly concedes that uncertainties in its numbers “need to be recognised”.

From September, the new Euro 6 standard for diesel engines will become mandatory in new vehicles, introducing better filters and catalytic converters in exhausts. Whatever the impact of particulates and nitrous oxide emitted by diesel engines is on our health, and there surely is some, especially from traffic jams in towns, the Society of Motor Manufacturers and Traders claims it has already been reduced and will be substantially improved by Euro 6 and new ultra low emission zones in city centres.

None of this should detract from the fact that the diesel engine was a brilliant development. Its German inventor, Rudolf Diesel, worked out that the trouble with gasoline is that it is volatile and detonates suddenly at too low a temperature.

The consequence is that a petrol engine is not terribly efficient. Far better to use a fuel based on another molecule produced during the refining process, which only detonates under high pressure, at a higher temperature, but which is more efficient.

Diesel’s engine burns this fuel. The air in the cylinder is already so highly pressurised that when the fuel is introduced, it detonates instantly, though slower than gasoline. You get a bigger thump and, literally, more bang for your buck.

The disadvantage is that some tiny particles are not burned and need to be filtered out later. But among the many benefits is that it uses less fuel and emits about 20 per cent less carbon than a petrol engine. Its high torque, or pulling power, makes it ideal for the heavy work done by boats, lorries or tractors, or hauling my family on holiday to Norfolk.

One suspects that poor old Herr Diesel would not be the least bit surprised at this topsy turvy debate, could he observe it from the great laboratory in the sky. In 1913 he tragically disappeared from a ship in the North Sea. The evidence suggests he was mired in debt and committed suicide, but conspiracy theorists ever since have believed he was done in by German secret agents eager to stop him attending a business meeting with the Royal Navy. The uncertainties, as they say, do need to be recognised.

George Trefgarne is a former partner at Maitland Consultancy