It's all about compression ratio

Compression ratio is the number that sets fuel economy and power output for internal combustion engines.  More is better.   Inside the engine, the fuel air mixture lights off at top dead center.  The piston goes down, expanding the hot combustion gases, cooling them, and converting the heat energy from the burning fuel into mechanical work.  Ideally we would keep the piston moving down, expanding the cylinder volumn until the combustion gases had been cooled down to room temperature, extracting all possible mechanical work from the fuel burn. 
   In real engines, the piston cannot keep going down forever.  The piston gets to bottom dead center.  Which is about 4 inches in a typical car engine.  At which point the exhaust valve opens and the still blazing hot combustion gases go out the tailpipe.  At night, running a short straight exhaust pipe, no muffler, you can see the exhaust gas glowing blue-white.  That's a lot of heat energy that didn't get converted into useful work. 
   Compression ratio is the ratio of cylinder volume with the piston at top dead center (as small as it gets) to the cylinder volume with the piston at bottom dead center (as big as it gets).  The higher the compression ratio, the more of the heat energy of the fuel gets converted into mechanical work.  Gasoline engines in cars have compression ratios as low as 8:1, 10:1 in good engines like the Cadillac Northstar, and 13:1 in outright racing engines. 
   Why not use a higher compression ratio and get more efficiency?  In gasoline engines we put a combustable fuel air mixture into the cylinder at bottom dead center and compress it as the piston goes up to top dead center.  As the mixture is compressed, it gets hotter.  When it gets too hot,  it catches fire and burns before the piston is at top dead center, and tries to drive the engine backwards.  You can hear this happening, it is a pinging noise (knocking) from the engine.  Good fuel  (high octane rating fuel) will suppress knocking for a while, but there is a limit.  Call it 10:1 for a "street" engine. 
   And this is the benefit of the diesel engine.  Diesels have just pure air in the cylinder for the compression stroke.  Fuel is injected into the cylinder at top dead center. Diesels cannot knock.  Which means that diesels can run compression ratios as high as 20:1.  Which is why diesels have better gas mileage than gasoline engines.