It would, you dont use fuel if you cant move :D.
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It would waste fuel as you'd be doing thousands of RPM and not getting anywhere. You'd be somewhere in the realm of 999.9L/100km.
As for the FW hubs, if you did have a Santana selectable gearset in your D1 transfer, the money you save in fuel, would be far exceeded in the original cost of the Santana gearset and the increased wear of the front prop shaft and unlubricated swivel pins.
There is, or was, a conversion kit available from a 4WD place in Adelaide. I wouldn't waste my money on one.
You would need to modify the transfer case to prevent the front drive.
This is what they do on the 80 series l`cruisers, couples with manual locking hubs.
It does reduce wear on the front three, but that's about it.
The front three what? I would suggest that it might reduce some types of wear, but increase other types.
Any modification of this sort done to "improve fuel economy" would cost so much and any improvements made would be so small that the payback period would be measured in 100s of thousands of km traveled or decades in time.
A mate of mine did it to his 80 series 6 cyl petro., cost $1200 about 8 years ago and improved the economy by 2lts / 100kms.
@$1.50 / litre that is $3 / 100km or $30 / 1000km.
Payback 40000km.
Positives, it steered easier and straighter (no more wander).
IMHO I wouldn't waste my time.
Eight years ago the petrol price was not that high, and today the cost would probably be a lot higher, so the payout time wouold be a lot longer. Having run my Series Landrover with and without the hubs engaged, I could not measure the difference in fuel consumption, so I do wonder how accurate the 2l/100km is.
John