One important factor here is the American oil glut in the early 20th century. Diesel engines are more efficient, but American oil was too cheap for this to matter; "in 1938, it extracted nearly 60 percent of global output, compared to less than 15 percent produced in 2006 by Saudi Arabia". So there was little drive in the US to meet the engineering challenges of designing light diesel engines; GMC didn't establish its diesel division until 1938, after Mercedes-Benz had introduced the first diesel car in 1936.
In addition, it really is harder to engineer a diesel engine; they were heavier, dirtier, noisier, and less reliable for a long time.
Source: end of ch. 3 in Vaclav Smil's "Prime Movers of Globalization". http://www.worldcat.org/title/prime-movers-of-globalization-the-history-and-impact-of-diesel-engines-and-gas-turbines/oclc/839821680
In the early days of the automotive industry, gasoline was a cheap waste product that oil companies were just throwing away.
Before automobiles, gasoline was considered a waste-product of the much more lucrative kerosene refining process. Oil's early "killer app" was providing a safer, cheaper alternative to whale oil, thanks in part to its higher boiling point. Kerosene is made from heavier hydrocarbons than gasoline -- in the 12-15 carbon atoms range vs. gasoline's 7-11 range. That means gasoline has a much lower boiling point and isn't safe for use in lamps.
People used to burn it off or let it evaporate -- or just dump it in sewers or directly into the rivers. (This was the cause of several of the times the Cuyahoga River caught fire in the 19th century.)
There were some early attempts at getting it sold as paint thinner, but it was Rockefeller who was frugal and opportunistic enough to finally find a use for gasoline -- fueling the new internal combustion engines that were invented in the latter part of the 19th century. Early engines could be made for nearly any combustible fuels, but gasoline was perfect because it was relatively light but still liquid and cheap as can be, since refining oil at this time [churned out 10% of the inputs as "waste" gasoline.
Actually, this brings me back to a problem with the question you asked: diesel engines were not invented earlier. Compression-based diesels were invented in the 1890s, while Otto cycle gasoline engines date back to the 1870s. Gasoline burning engines had a two-decade head start on diesel and were better known when Ford left Edison's employment to found his own motor company in 1896.
Side note: In researching this, I came up with a lot of conspiracy theories about Rockefeller killing alcohol fuels as a competitor to gas. Don't put any stock into that. The timeline doesn't add up, nor does it quite fit the motives of the men involved.
As a final note, the gas engine would save Standard Oil later. Once engines standardized on gasoline, demand for it bloomed, and oil companies were faced with a shortage. They invented "cracking" as a means of turning long-chain hydrocarbons into shorter chain ones to meet that demand, and it helped save the company when electricity killed the demand for kerosene as an illuminating oil.
Some additional sources:
http://knowledgenuts.com/2014/02/24/gasoline-used-to-be-considered-garbage/
http://www.attendly.com/rockefellers-unconventional-approach-to-getting-rid-of-waste/
[Caveat: I am not an automotive nor petroleum historian, and most of this was just the result of careful internet searches based on knowledge I had floating around in my brain beforehand.]
Alright guys, all the comments in this thread have been removed because they do not do a good job of answering the question. OP asked for history-based answer and he's in /r/AskHistorians
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Chem eng here, I'm too tired to disentangle this mess of a thread (a quantum thread if you will, where posts seem to pop in and out of existence at random) but there's some misinformation here I want to sort out.
A diesel engine is defined by the thermodynamic cycle it uses, i.e. the Diesel cycle. Gasoline engines use the Otto cycle. That's it. Diesel engines can heavy gas oils or anything else if they're designed for it, they don't have to use "diesel".
At C5+ basically all your fuels are going to be a blend of different molecules that averages out into some set of specs (MW, RVP, etc.) What's typically referred to as "diesel" is a heavier cut than kerosene, which is a heavier cut than gasoline. They'll all share some species of molecules in their blends but the averaged properties are different, i.e. diesel isn't god damn kerosene whoever proposed that is insane.
An extreme minority of products directly out of crude fractionation is going to be either gasoline or diesel. You can expect maybe 30% of gasoline blender to come from the FCCU, another 30% from the reformer and the balance from other random units. Refineries have a thin margin for tailoring their products once they're built but we build these units to turn other things into gasoline because gasoline is valuable. If it was some other thing that was worth a lot of money, we'd figure out how to make that instead. You can see that North American refineries tend to produce a higher fraction of gasoline than elsewhere even though they tend to use heavy feeds. I would be extremely skeptical of "because we didn't know what else to do with the crude gasoline fraction" as an a priori cause.
Diesel engines were historically licensed in north america to a single company for the life of the patent which largely worked on "Dieselization" of former steamworks. Most early Diesels were HUGE engines, used in factories and steam vessels (they had 50-100% more efficiency than the steam engines they were replacing). Very early diesel's were pretty unreliable, and the inventor was a bit unrealistic about the timeline for development (so much so he eventually killed himself due to issues surrounding it). There were massive cooling problems which also made them unrealistic for use in small motor situations.
Modern Diesel engines in small trucks and cars rely on a device called a "turbocharger" which wasn't miniaturized at the scale used in trucks until the late 30s (there were also early problems with seals). In 1936, the first turbocharged diesel engines for trucks were built by Diamler Benz
https://www.dieselnet.com/tech/diesel_history.php#diesel if you want to read more on a very well sourced online document
This is an expesive book on the topic, but is pretty thorough of some of the blow by blow of the history
tldr: Diesel engines had lots of promise for a long time, but lots of problems too, and weren't ready for the small platform when gas cars started being developed. They took forever to get near the proper power levell, and require other technologies (turbochargers, cooling systems) to function to the fullest
There's a strong case to be made that this was primarily a historic engineering issue, not one of fuel availability or politics. After all, who wouldn't want double the range with the same size fuel tank? Moving millions of gallons of liquid is expensive, even if the liquid itself is cheap. Though the Model T was released in 1908, it was 1936 before the Daimler-Benz Company introduced the first production diesel automobile.
Rudolph Diesel correctly observed that an engine with a higher compression ratio would lead to more power and higher efficiency, but the higher energy density also created serious engineering challenges. His first paper diesel design ran at 1500 PSI and had a theoretical efficiency of 72%, but after 5 years of development and at least one high pressure failure that injured him, he reduced the design pressure by a factor of 9 and the fuel used by a factor of 8 to create a manufacturable engine with an efficiency of 30%. "Leaking valves and gaskets made reaching the high air pressures needed to start combustion nearly impossible." (source). A different source claims the pressure was only reduced to 550 PSI, a factor of three. (source) Either way, the pressure was still much higher than gas engines at the time, which operated on the order of 4.5:1 ratio (as with the Model T), or 65 PSI.
In Diesel's design, containing these pressures required thicker cylinder walls, increasing material cost, increasing engine weight, and lowering overall vehicle performance. Gasketing materials also needed a larger bearing surface to contain the pressure. Manufacturing tolerances has to be tighter, too.
And once Diesel finally got the engine running, cooling was a challenge for long runtimes. Cooling a diesel is slower because of the thicker cylinder walls and the additional heat per cylinder. Though higher temperatures are more efficient, maximum engine temperature is limited by the lubricating oil, which is needed to reduce pistol-cylinder friction. Unlike small gas engines that can operate for a time with air cooling, "Diesel’s engine now had to be liquid cooled to remove excess heat"(source). The Model T used a water jacket around the engine that operated on the thermosiphoning principle (hot water rises, creating convective current), and so there was no pump that could break, unlike a Diesel engine, where a failed pump would cause catastrophic engine failure in short order.
It is easy to read that the Diesel engine was invented in year "X", and that it immediately took off and was a great sales success. The truth is that Germany had a LOT of coal, but petroleum-based fuels were in short supply. Rudolph Diesel was searching for a large (very heavy) single-cylinder engine that could run off of coal-dust, in order to power equipment in a factory. The original design used an air-compressor to create enough pressure to inject the coal-dust near top-dead-center (TDC) of the compression stroke.
He had a hard time finding investors to help pay for prototypes so he could determine what was the highest compression ratio he could get away with. Also needed to fine-tune many aspects of the design. It was quite a milestone when he showed the engine (still as a factory power-supply) using peanut oil as the fuel (again, because Germany didn't have crude-oil wells). One of the big problems had been developing a high-pressure liquid fuel pump from scratch that would work well.
He displayed the peanut-oil burning engine at the Paris Worlds Fair in 1900, many years after Daimler (Mercedes) had already been successfully selling small gasoline boat engines (an making a fortune, since cargo boats were the trucks of Europe before roads were improved to be better than horse-trails). Benz worked at making and selling gasoline cars immediately, but struggled his entire career.
Here's a pic of Rudolphs 1897 engine to get a feel for the size and type he was working on: http://en.wikipedia.org/wiki/Diesel_engine#/media/File:Diesel%27s_Engine.jpg
In 1901, Rudolph was still looking for investors for large factory engines, while Oldsmobile sold over 400 gasoline-burning cars that year. 1903 is when the Wright brothers first flew with a light 4-cyl gasoline engine.
Carburetors were easy to design and make, especially after the idea was published and proven. Sparking systems were easy to copy and make, too (Bosch).
Here's a good pictoral of early gasoline engine development http://daimlermotorcycle.com/history1.htm
I can actually answer this because it truly is "history", as in "ancient history" - we don't have enough refinery capacity. The articles you see in the news about gas prices falling because of a glut is associated with an imbalance. We make a lot more gasoline than we do diesel and we don't tend to keep extra capacity.
Here's a table of all recently owned refineries:
http://www.eia.gov/tools/faqs/faq.cfm?id=29&t=9
As you can see for yourself, we haven't been building refineries. There are two opposing arguments as to why. The right blames the left for environmental blockage in politics, whereas the right gets the blame because market factors prevent the building of more; refineries not being used don't make money. Refineries working at full capacity create artificial shortages, which does make money.
It's really an issue of policy. The left don't want to harm the environment with more refineries and the right doesn't want to address the artificial scarcity which makes money for the owners. Right now you're seeing it go the other way with a glut of fuel and sectors of the business on the verge of collapse like dominoes. That's really more of an economics question, but it almost seems as if it works.
Anyway, in Europe the politics are different and there is plenty of diesel capacity. In Brasil, it's sugar. They have plenty of sugar.
In the USA, we had a combination of factors. Before turbocharging, diesel didn't offer the same performance as gasoline and created much more pollution. With the inability to increase refinery capacity, we missed the "golden age of diesels" - it's only in the past 25 years or so that turbocharging and waste reduction have come into play and made it a viable fuel. In the meantime, we weren't building refineries and couldn't switch them over since they were running at full capacity. You will also notice this coincides with the first Iraq War which drove the prices of gasoline way up.
I'm a huge fan of diesel and I hope that we are able to use it more. Diesel is the lifeblood of commerce for our huge country. Trucks and trains run on it. The cheaper we can make it, the cheaper we can make commerce.
Gasoline became a de facto standard because of lack of political will or understanding. Unless we're willing to undertake state ownership in refineries or give big grants, we can't expect the private sector to take the burden of risk to switch over.
A minor point would also be patents. If you follow Tesla, you know they're opening their patents. This is bigger than you realise. Since the USA as a nation wasn't really using diesel, Europe was doing all of the research and investment. When Chrysler sold diesels a few years ago, the engines were sourced from Mercedes-Benz. GM and Ford of Europe do have diesels and there are partnerships there. We are developing hydrogen instead. If we can make hydrogen work, they have to licence the technology from us. If we want diesel, we have to pay them for the technology as well as the more expensive mechanical/electronic components.
I may be too late on this one, but diesel engines emissions are far worse than gasoline engines. With emission regulations getting tighter and tighter every year, from both the EPA and CARB, more money needs to be put into after treatment technologies. This obviously has a negative impact on cost per engine sold.
Source: mechanical engineer for the largest diesel engine company in the US
