Why The U.S. Has A Diesel Shortage

Energy Why The U. S. Has A Diesel Shortage Robert Rapier Senior Contributor Opinions expressed by Forbes Contributors are their own.

Following New! Follow this author to stay notified about their latest stories. Got it! Oct 30, 2022, 07:00am EDT | New! Click on the conversation bubble to join the conversation Got it! Share to Facebook Share to Twitter Share to Linkedin HOUSTON, TEXAS – JULY 29: Gas prices are displayed at an Exxon gas station on July 29, 2022 in . .

. [+] Houston, Texas. Exxon and Chevron posted record high earnings during the second quarter of 2022 as energy stocks have faltered in recent months.

(Photo by Brandon Bell/Getty Images) Getty Images Last week, the Energy Information Administration (EIA) reported that distillate inventories were at their lowest levels since 2008. (The primary distillates are diesel, jet fuel ,and heating oil). However, in 2008 distillate levels were low coming out of spring.

Currently, they are low going into fall. That’s far worse than the situation in 2008. Distillate demand generally spikes in spring — when farmers are planting crops — and in fall, when they are harvesting those crops and people start buying fuel oil for winter.

Thus, a low distillate inventory in late April 2008 isn’t quite as serious as a low inventory in October 2022. In fact, distillate inventories haven’t been this low in October since the EIA began reporting this data in 1982. These low distillate inventories are why diesel prices are above $5.

00 a gallon nationwide, even though the nationwide average price for gasoline has dropped below $4. 00 a gallon. Why is there a diesel shortage this year? There are four factors, but two of those factors are in play every year.

As mentioned above, distillate demand spikes at this time of year. But, it does that every year. This is also the time of year that refineries are doing maintenance.

They tend to do that in the spring and fall, which is when demand is lower and the weather is decent. So, refinery capacity drops at this time of year. Third, U.

S. refinery capacity has fallen in the past few years as several unprofitable refineries were closed. So, that’s a new factor that has appeared in the past couple of years.

But the primary reason is the cutoff of Russian imports. Prior to Russia’s invasion of Ukraine, the U. S.

was importing nearly 700,000 barrels per day (BPD) of petroleum and petroleum products. Most of those imports were finished products and refinery inputs that boosted distillate supplies in the U. S.

MORE FOR YOU Meet The Unknown Immigrant Billionaire Betting Her Fortune To Take On Musk In Space 4 Ways To Get Your Marketing And Sales Teams On The Same Page Amazon Now Allows You To Use Venmo …And Other Small Business Tech News This Week The loss of those Russian imports have caused problems for refineries as they struggle to fill holes in their product slates. Refineries do have a small amount of flexibility in shifting gasoline production to diesel production. But it’s a relatively small amount (e.

g. , ~5% in a refinery I once worked in). That also means that if refiners do shift production, that also potentially creates shortages in the gasoline market.

Some relief is on the way, as some diesel imports are on the way from Europe to the East Coast. But, the distillate market won’t likely return to normal before next summer at the earliest. Follow me on Twitter or LinkedIn .

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