why is there a diesel shortage

why is there a diesel shortage

Factors impacting the shortage include. Diesel prices hit historic highs this week. So critics say that an export ban could backfire and actually drive up pump prices in areas of the country. An American consumer may say that this isnt our problem, but this isnt being done for altruistic reasons. Refineries on the East Coast had to scale back due to staffing issues, and it can take several months and up to a year to have them operating at pre-COVID levels. Speaking to Newsweek on November 2 about general diesel fuel problems and prices, De Haan stated that "Biden is not to blame this is due to lack of refining capacity, which has fallen 1 million barrels a day, primarily due to COVID-19 in 2020 curbing demand. Other factors here include seasonal maintenance at many refineries, as well as extreme weather and explosions prompting shutdowns at other refineries. All rights & content reserved. Substantial diesel volumes come to the Northeast from the Gulf region via the Colonial Pipeline. Officials are now considering steps like export restrictions that would be unprecedented -- and that critics say could well backfire. See here for a complete list of exchanges and delays. In terms of consumption, however, inventories at the end of July were equivalent to just 30 days of demand, the lowest seasonal level in monthly records going back to 1945. And that has created a shortfall in the ability to make gasoline and diesel at a time of resurgent demand. Gasoline and Diesel Fuel Update - U.S. Energy Information Wednesday 31 May 2023, 1:36pm. My message to the companies running gas stations and setting prices at the pump is simple: this is a time of war and global peril. In the Northeast, where more people burn fuel for home heating than anywhere else in the country, inventories are a third of their typical levels heading into winter. Remember, high gas prices hurt refining, What exactly is diesel, and why is it so important as an energy source? Debt ceiling fallout puts U.S. credit rating in limbo. They noted that while its technically true that the U.S. Energy Information Administration (EIA) 25-day supply of diesel fuel number is correct, its being misinterpreted. Renault could face prosecution in France over faulty engines as a group of customers plans to lodge a criminal complaint against the carmaker next week, the group's lawyer said on Friday. Reason number one is that we've had huge The country is down to 25 days of diesel supply with stockpiles at their lowest level for this time of year in records going back to 1993. Build the strongest argument relying on authoritative content, attorney-editor expertise, and industry defining technology. There are early indications manufacturing and freight activity peaked in the third quarter of 2022. So and of course, we've already heard from the U.K. Are 529 plans worth it? In Charlotte, North Carolina, 71% of stations were dry, according to GasBuddy.com, a site that tracks gas prices. In the former, the curve is downward sloping, meaning prices are expected to fall in the future; in the latter, its the reverse and upward sloping. Any trading and execution of orders mentioned on this website is carried out by and through OPCMarkets. Inflation is Going to Get Worse. This can drive up costs, and make it more economical for that Gulf Coast refiner to export to Europe or South America. Everyone is worried about gas prices, but diesel is driving - CNBC The U.S. There's a big difference between the price of gasoline and diesel. --With assistance from Jack Wittels and Alex Longley. Also, while higher gas prices have an impact on inflation, diesel is a bigger driver. Overall, it has been a perfect storm for diesel. Why is there a diesel shortage this year? And so we're in a situation where supplies are so tight that some terminals on the East Coast have started to run out of fuel. The obvious question, then, is why this is being done. This would provide a much-needed cushion of supply in the most vulnerable regions and forestall shortages. Four primary factors lead to this shortage. (Photo by Peter Dazeley/Getty Images). Outside the East Coast, markets could face some challenges, but most of the biggest issues will be concentrated eastward.". They tend to do that in the spring and fall, which is when demand is lower and the weather is decent. And some companies closed around 1 million barrels per day of refining capacity during the pandemic. Merchant of Record: A Media Solutions trading as Oilprice.com, Long $ibm International Business Machines. Our supply of diesel will be exhausted in less than a month., Similar to his language on November 3, Carlson stated on October 28, Thanks to the Biden administration's religious war in Ukraine, this country is about to run out of diesel fuel. (Photo by Brandon Bell/Getty Images). Although maintenance occurs, oil companies are not dumping a lot of money into maintenance due to Biden regulations and goal of eliminating them. This could prevent the winter-time stockbuilding that typically happens, raising the risk of a thinner-than-usual supply cushion going into spring. Diesel shortage will hit these seven states the hardest. Individuals should consider whether they can afford the risks associated to trading. MARTIN: So I can imagine that this is a very difficult issue for the Biden administration. Even if you don't use diesel yourself, you're obviously affected by it, right? The author noted that the EIA metric measures the days worth of supply if U.S. refineries stopped producing oil and the industry stopped importing it from other countries. This is not the same as the U.S. running out of diesel in 25 days. Most of those imports were finished products and refinery inputs that boosted distillate supplies in the U.S. Is my observation correct that prices seem to have eased? According to the fuel supply company, extremely high diesel priceswhich have surged due to low inventories combined with high demandare concentrated in the North East, while supply outages are currently hitting the Southeast. Prior to Russias invasion of Ukraine, the U.S. was importing nearly 700,000 barrels per day (BPD) of petroleum and petroleum products. 74-89% of retail investor accounts lose money. The other obvious question which I am often asked is why we dont ban companies from exporting fuel during a fuel crisis? according to analysts who previously talked to. But, the distillate market wont likely return to normal before next summer at the earliest. Keep in mind that there may have been multiple reasons why someone might have used the word "shortage" combined with the name of a product like "avocado" or "diesel" in a Google search. Programs Tucker Carlson pushed diesel shortage disinformation days after getting fact-checked, Special But building up government supplies out of domestic production will reduce exports and drive up global prices further. Third, U.S. refinery capacity has fallen in the past few years as several unprofitable refineries were closed. What's causing a diesel shortage in the U.S.? These are the industries most impacted by a diesel gas shortage: Trucking and . support U.S. consumers. But they will probably want to wait for the shortages to become much worse when the weather gets colder. Bring down the price you are charging at the pump to reflect the cost youre paying for the product. Reuters provides business, financial, national and international news to professionals via desktop terminals, the world's media organizations, industry events and directly to consumers. Distillate inventories were a massive 26 million barrels (-20% or -1.94 standard deviations) below the seasonal average for the previous ten years (Weekly petroleum status report, EIA, Oct. 26). The administration has the option of waiving a shipping law that requires cargoes like fuel be carried between domestic ports only on US-built, -flagged and -crewed vessels. As a result, retail diesel prices including applicable taxes are now $1.45 per gallon higher than for gasoline, a record premium, up from just 24 cents per gallon a year ago. Following my recent article Why The U.S. Has A Diesel Shortage one reader pointed out that I omitted one factor from my analysis. The global diesel and energy shortage might not get better soon. Exxon and Chevron posted record high earnings during the second quarter of 2022 as energy stocks have faltered in recent months. Limited supply could lead to a big impact on people's wallets. The short and simple answer is that companies are doing it because they can, and because they are making more money doing this than selling it in the U.S. Consumers may complain, but ultimately these companies are trying to make as much money as they can, and that means selling products to the highest bidders. Distillate fuel oil is primarily used in freight transport, manufacturing, farming, mining and the oil and gas industry itself, so consumption is strongly influenced by the economic cycle. The demand for diesel in Europe has increased since they announced they would phase out Russian oil imports in 2022. And that's because, again, similar to diesel, inventories are very low. Along with the . Companies dont want to risk sending a shipment of diesel only to find the per-gallon price has dropped in the time it takes to get to its destination. 7. Speaking to Newsweek on November 2, oil industry analyst Tom Kloza stated that refineries now have a very high incentive to continue producing diesel. But with all these elements going on at once, it seems like that's not really going to happen. Stocks of diesel and other distillate fuel oils were just 106 million barrels on Oct. 21, the lowest for the time of year since the U.S. Energy Information Administration (EIA) started collecting weekly data in 1982. But the act is very popular with unions, shipbuilders and owners who have significant clout in Washington. Third, U.S. refinery capacity has fallen in the past few years as several unprofitable refineries were closed. That's more than enough time for innovation to go from the lab to the plant floor. (Source: Bloomberg). The lack of supporting evidence hasnt stopped right-wing media, particularly on Fox News, from fearmongering about how diesel supplies are running dry any moment. Why is there a fuel shortage? What we know about diesel supply issues The low supply of diesel fuel is the result of a loss of refining capacity worldwide, after Covid wreaked havoc on the oil industry. According to Bloomberg, the United States has just 106 million barrels of diesel and heating oil in commercial stocks the lowest inventories since 1951. "This year, however, the East has less than 25 million barrels on hand. Will There Be A Diesel Shortage? Some relief is on the way, as some diesel imports are on the way from Europe to the East Coast. Currently, they are low going into fall. hopefully the US government does not take steps to restrict exports because, The supply situation got worse after Russia invaded Ukraine and the West responded with sanctions, including those targeting the countrys energy exports. Refineries are the issue. natural gas prices globally. But its a relatively small amount (e.g., ~5% in a refinery I once worked in). And she is with us now. the last couple of years during the pandemic. Kloza said it is the middle of the barrel diesel that. is now coming back to haunt us. MARTIN: So normally, gas prices ease. Its hard to argue that it wouldnt, but it would exacerbate the crisis elsewhere. And this matters even if you don't use diesel yourself, because it's an essential part of the supply chain. Now Its Gone, Fortescue Hires Morris to Complete All-Female CEO, CFO Team, How Climate Scientists Predict Indias All-Important Monsoon Rains, Senate Fails to Strip Manchin Pipeline Deal From Debt Bill, Work From Home Cost Texas Companies $20 Million in Tax Breaks. U.S. companies have been exporting more than a million barrels a day of distillates for about a decade. Diesel fuel is in short supply as prices surge - CNBC NPR's Michel Martin talks with Bloomberg reporter Chunzi Xu about the state of gas and diesel prices across the country. var write_html = `