The diesel engine has the highest thermal efficiency (engine efficiency) of any practical internal or external combustion engine due to its very high expansion ratio and inherent lean burn which enables heat dissipation by the excess air. A small efficiency loss is also avoided compared to two-stroke non-direct-injection gasoline engines since unburned fuel is not present at valve overlap and therefore no fuel goes directly from the intake/injection to the exhaust. Low-speed diesel engines (as used in ships and other applications where overall engine weight is relatively unimportant) can have a thermal efficiency that exceeds 50%.

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