I have been advised to rent a diesel automobile for sightseeing in SOUTHERN PORTUGAL, SOUTHERN SPAIN, and GIBRALTAR because diesel fuel is less expensive. Can anyone tell me how much fuel costs are and how available diesel fuel is in these areas?

You won´t have any problem about finding diesel in Iberian Peninsula. I suppose you must be american, because of your question; Diesel is a very popular gas ALL OVER EUROPE! because is the cheapest. In Spain and Portugal one litre costs about 0,65 $, and you will find gas stations without any problem.

Enjoy your trip