Europe Summary
•European diesel demand growth supported by recent strong growth in diesel-fueled LDVs
•Recent diesel-fueled LDV growth was primed from previous base already established
•European refineries investing for increased distillate yields, but demand mix changes away from gasoline continue to outpace supply shifts
•Future: Still see increasing gasoline exports for some time – but will economic distillate imports be available?  Will large ULSD price premiums be the norm? 
SEurope’s growth in diesel demand stemming from its emphasis on diesel-fueled light-duty vehicles has risen from Europe’s desire to reduce consumption.  It has been encouraged by tax and vehicle purchase incentives.  Furthermore, Europe’s particulate and NOx emission requirements for these diesel-fueled vehicles are less stringent than in the U.S.

SThe most recent  surge in penetration was possible because the manufacturing and  distribution base for these vehicles was in place, and consumer acceptance was established.  That is, Europe had a firm base from which the recent growth could spring.  This is not the case in the U.S.

SAs we look to the future, Europe’s challenge will be how best to continue meeting its distillate demand growth.  It’s traditional  sources of imports (FSU and Middle East)  may be limited in their ability to increase supply, particularly now that Europe has moved to low sulfur diesel.  Europe is a major market force in the Atlantic Basin, and as its need for distillate increases, the relative price of diesel and gasoline may change, and any price pressure will be felt in the United States.