At this point it’s no secret that the world's expanding population continues to demand more and more energy resources. With some analysts and policy makers predicting that global energy use will jump by 53% or more by 2035, investments in the energy sector have become popular choices for investors. Funds like the SPDR S&P Oil & Gas Exploration & Producers ETF (NYSE:XOP) have become portfolio staples, as investors capitalize on this trend.

However, most investor attention is focused on crude oil, coal and natural gas demand growth. However, one former "dirty" fuel source is seeing its star shine throughout the emerging world and could be an interesting side bet in the energy sector.

Rising Diesel Consumption

While diesel fuel maintains a “dirty” reputation here in the United States, the rest of the world is going gaga for the energy source. According to the International Energy Agency (IEA), global diesel consumption grew 23% between 2000 through 2008 as a variety of developed and emerging nations turn to the fuel as a way To power not only transportation vehicles, but produce electricity as well.

And the trend for higher diesel demand is firmly at hand.

As drivers in such diverse places as Mexico City and Beijing continue to choose diesel over regular gasoline, demand is set to explode. According to integrated energy stalwart ExxonMobil (NYSE:XOM), diesel will overtake regular gasoline as the number one transportation fuel worldwide by 2020. More importantly, diesel will continue to increase its share of the pie and by 2040, the transportation fuel is expected to have grown by 40% since 2000. 

Meanwhile, diesel is finding its place as an electricity generator. As a verity of growing nation’s battle with inefficient grid infrastructure, diesel generators are becoming the norm. Despite adding a plethora of solar panels, the number of diesel generators in China has begun to skyrocket and demand for the fuel is adding around 300,000 barrels per day to the nation's diesel demand. 

Betting On The Diesel Refiner To The World

Given growing diesel demand, making a play for the providers of the fuel makes some sense. And the place to do it is here in the U.S.A. That’s because higher fuel efficiency standards, low economic growth and high gasoline prices are having an effect on the number of miles we drive. That’s reduced the amount gasoline demand here in the states. In order to combat that, the refineries here have been exporting record amounts of diesel to these foreign lands- about 2.6 million barrels per day by the end of 2012. That trend is firmly in place to continue.

That could mean big things for both Valero Energy (NYSE:VLO) and Phillips 66 (NYSE:PSX). The refiners have already been feasting on big margins, but have recently made diesel exports a priority. Phillips has already seen its diesel exports grow by 80% year-over-year, but the firm is making investments to double diesel refining capacity. Likewise, Valero has recently invested in facilities to improve diesel yield as well as exports from terminals on the Gulf Coast. Both of these refiners are a great way to play the global growth in distillates. 

Not to be outdone, Marathon Petroleum (NYSE:MPC) has stepped up its diesel game and is ahead of schedule to complete a massive overall at its Garyville refinery. That will increase the “crackers” capacity by 20,000 barrels per day for production of ultra-low sulfur diesel. The kind that is made for transportation applications. 

Finally, Tesoro (NYSE:TSO) could be a good bet. The company has also invested big time with regards to diesel fuel. These include $35 million at its Mandan facility as well as $275 million at its Salt Lake City in order to improve the yields of both gasoline and diesel. More importantly, Tesoro’s recent acquisition of BP’s (NYSE:BP) Carson City refinery was designed to increase diesel production flexibility. That refinery is strategically located in California and is able to ship diesel towards emerging Asia. 

The Bottom Line

While it’s often ignored, diesel is quickly becoming a very important piece of the global energy pie. Demand continues to grow as various nations shift towards the fuel for both transportation and power needs. For investors, adding a swath of diesel power to your portfolio makes sense. The previous picks make ideal selections.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.