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Diesel Demand Digs into Deposits

Diesel Demand Digs into Deposits
  • Post category:News

It’s been a tough few months for anyone who needs to fuel up their vehicle. The ones hit the hardest by the surge in gas prices are the ones who need diesel. You could fill up your Ferrari or Porsche for less than it costs to fill up a diesel truck. Diesel is now the most expensive gas option one could choose at the pump, and it’s starting to take its toll on the transportation industry. It’s such a problem that it even got the attention of the White House. The good news is that diesel prices look to be retreating back to what one could assume is normal in a post pandemic trade war. In the Northeast, prices are still over $6 per gallon. However, the Biden administration may do something it hasn’t done in a decade, which could help alleviate the stress at the pump.

Supply and demand is something that everyone learns a little about in their high school economics class. Those two words seem to affect prices more than anything else in the world. Even though the demand for diesel hasn’t changed, the supply is definitely at an all-time low. This means that prices go up, and until the US can find more diesel, the prices will continue to rise.

Diesel Run America

With inventories so low on diesel, the White House is considering an emergency declaration. After all, Americans need diesel to run this country. To power trucks to ship goods and supplies, to heat houses and run generators, and power ships across the sea, diesel fuel flows through the heart of America. Tapping into the reserves like the White House wants to do is something that rarely happens. The last time it happened was after Hurricane Sandy in 2012. It could help alleviate prices temporarily, but the problem is global and there’s going to need to be a lot done before diesel prices are safe from inflation.

The biggest reason for the shortage of diesel in America is that the US and Canada simply retired many of their oil refineries. These facilities are required to turn crude oil into gasoline, jet fuel, and, of course, diesel. The hope was that we could retire these facilities while the country worked on more sustainable options like electric vehicles and nuclear power. The issue is that although these technologies are on the rise, they aren’t as wide spread as needed. Especially since the need for energy sources rebounded after a pandemic-driven crash. This increased the price of all fuel sourced from crude oil. The most notable is jet fuel.

This isn’t an American problem, it’s a Global Problem

There are no electric planes as of yet. Airplanes use a large portion of diesel fuel and will pay to keep their industry afloat. Furthermore, refineries profit more from converting crude to jet fuel over converting to diesel. With the last remaining refineries focused more on jet fuel than diesel fuel, America is forced to look elsewhere for their needs.  The war in Ukraine and sanctions against Russia has all but stopped imports from Russia which is one of the world’s largest producer of diesel fuel. The US does have oil, but if we’re not converting it to jet fuel, we’re shipping it to the rest of the world. We ship globally more than 1 million gallons a day. This doesn’t leave us with much left over.

The diesel supply isn’t getting better, but experts say it can’t get any worse. Stocks are starting to bounce back on the short term. Down for the year they are slowly starting to go back up week to week. With prices cooling down, volatility and price shocks may soon be the norm. Only time will tell if prices will continue to drop, but outlooks are hopeful until more sustainable options can roll out.

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