Jim,
On what basis do you presuppose that converting from coal or wood to oil nets a reduction in power? Many locos have been converted from coal or wood to oil have done very well. Do you have some data to the contrary?
SVRy #19 was designed to burn coal or wood. She was fired with wood for ~20 years. Another ~20 years she was fired with oil. She is now still an oil burner. She runs a clear clean stack and with an experienced Fireman finishes her 5 mile jaunt from McEwen to Sumpter with 3/4 glass of water, and just short of poping off. #19 is a pretty good sized NG engine. Maybe smaller locos would not do so well on oil, I can't comment on that since I have no experience with smaller oil burning locos. Although, #40 on the GTL is smaller than #19, and she does real well on oil on a steeper grade! She sure barks louder than #19! What a terrific ride that was in #40's little cab!
dan