Dropping demand for gasoline has taken a chunk out of last year’s super-high prices, and refiners are shifting capital expenditures accordingly. Prices for gasoline rose 7.1¢ on Jan. 5 to $1.68 per gallon but were still down 46% overall since a year ago, reports the federal Energy Information Administration. On-highway diesel prices fell 3.6¢, to $2.29, a 32% drop since 2008 and the lowest in years. Despite the winter price rollback for both fuels, diesel is “the growth fuel, globally,” says Allen Schaeffer, executive director of Washington, D.C.-based Diesel Technology Forum. As such, ExxonMobil Corp. and others are boosting output of clean diesel to match projected rising demands.

Specifically, the Irving, Texas-based oil company says it will spend more than $1 billion over the next two years to pump up diesel capacity at its facilities in Baton Rouge, Baytown, Texas, and Antwerp, Belgium. “Our increase in diesel production at these sites will be equal to the diesel produced from about four average-sized refineries,” says Sherman Glass, the company’s president of refining and supply.

Due to be completed in 2010, the bulk of the work was awarded on Jan. 6 to Pasa­dena, Calif.-based Jacobs Engineering Group Inc., though Jacobs says it is not involved in the Belgium plant expansion. Other oil companies that have announced similar plans are Marathon, Motiva and Valero, according to published reports.

The shift taking place from gas to diesel “in some ways mirrors the situation in the car industry,” Schaeffer says. “Automakers were producing larger vehicles...and now those are in less demand, so everyone is shifting to investing in smaller cars.”