According to news reports, the supply of diesel fuel in the country is now down to 25 days. This has raised concerns about the safety and security of all food, goods, and services being delivered by diesel-powered trucks.
For more information on this matter of national concern, we spoke to Patrick DeHaan (an analyst at Gas Buddy) on Friday.
Diesel has a grim forecast for this Winter.
DeHaan stated, “It’s been an extremely difficult year for diesel, and certainly much that comes from Russia’s war in Ukraine.” Russia produces a lot of heavy products and a lot more heavy oil, which produces and yields more diesel. Another problem is the demand after COVID, which has increased significantly. There are many trucks and many goods. All of us can recall how the ports were stuffed with goods that Americans bought, and all those need to be moved out of port via trucks.
DeHaan emphasized the tension between diesel fuel production and the supply-demand process.
He said that diesel demand was high due to COVID. We lost about 5 percent of our refining capacity due to a lack of demand back in 2020. Due to less diesel being produced and more demand, U.S. inventories have fallen to the lowest level I can remember. This is 25 days, so things are tight which is pushing up diesel prices all across the country.
DeHaan stated that the Rocky Mountain Region will have more supply. DeHaan has more good news for Rocky Mountain residents.
He said that he thinks things are fine in the Rockies. That is, the refiners in the area are doing a great job refining, and that a lot is landlocked into the Rockies. The Northeast is going to be a problem because it doesn’t have enough refinery capacity. Ironically, the Northeast has 10 times more people than the Rockies and approximately the same refining capacities. This is because it is dependent on diesel imports and distillate products. The northeastern United States now competes with Europe for these barrels.
You can expect everything hauled by diesel trucks to cost much more
DeHaan stated that this winter will prove to be very difficult for diesel supplies, and therefore the limited supply will lead to a much higher global price.
He said that diesel could become a problem for us, and may get worse over the winter. We are not yet in winter and snow hasn’t really started to fly across the country. Therefore, colder weather is a concern as diesel is used in Northeastern areas for heating oil. Rural America uses home heating oil, so there will be a lot of pressure on that. If you have propane or home heating oil, the prices for heating your home will be higher. Natural gas prices could also be higher. However, it is possible that there could be some severe cold spells that could cause diesel prices to rise even further.
On Oct. 21, diesel and other distillate fuel oils stocks were only 106 million barrels, the lowest level for this time of the year since 1982 when the U.S. Energy Information Administration began collecting weekly data.