Sylvie Willis
In late October 2022, the U.S. Energy Information Administration (EIA) reported that the amount of distillate fuel available in storage represented 25 days' worth of supply. This figure, which is the lowest since 1982, does not account for imports and domestic production, which have not been halted. While this has caused concern, industry experts have stated that the United States will not run out of diesel. However, diesel prices are expected to increase.
| Characteristics | Values |
|---|---|
| Date of diesel fuel shortage prediction | 2022 |
| Number of days of diesel fuel supply | 25 |
| Reason for the shortage | Reduced domestic production, refinery strikes, outages, low refinery capacity, high demand, global trade disruptions, war in Ukraine, embargoes on Russian petroleum products |
| Impact | High diesel prices, voter resentment against the Biden administration, risk of shortages and price spikes |
| Possible solutions | Taxing oil companies' "windfall" profits, limiting fuel exports, increasing refinery capacity, addressing global trade disruptions |
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What You'll Learn
- The 25-day supply of diesel is lower than the average of 31.5–35 days under Biden
- The US Energy Information Administration (EIA) reported 106 million barrels of distillate fuel oils
- Biden threatened oil companies with a tax on windfall profits if they don't reinvest in production
- Refinery strikes in France and outages in Europe and the US have worsened the supply shortage
- The US is facing a diesel crisis due to rising supply deficits and high fuel costs
The 25-day supply of diesel is lower than the average of 31.5–35 days under Biden
In late October 2022, the United States Energy Information Administration (EIA) reported that the amount of distillate fuel available in storage represented 25 days' worth of supply. This figure is lower than the average of 31.5–35 days under Biden and is the lowest level since 2008. The Biden administration's policies have been blamed for the decrease in domestic production, with America extracting 1.2 million barrels per day less than its pre-Biden peak. The current diesel supply in the US is about 25% lower than the typical amount.
The EIA's "'days of supply' figure does not indicate that the US will run out of diesel fuel. Instead, it reflects the amount of diesel in storage relative to the amount typically consumed daily. The statistic of 25 days of diesel fuel left is true, but the interpretation that refineries will stop producing diesel and the country will run out in 25 days is false. The days of supply metric is a way to represent supply versus demand.
The recent supply shortage has been exacerbated by refinery strikes in France and other unforeseen outages in Europe and the US. The Permian Basin, the nation's top shale field, has experienced a slowdown in productivity and volume. The low diesel supply has resulted in higher prices for American consumers, with diesel prices projected to climb by 15 to 20 cents in the coming weeks.
The Biden administration has considered implementing administrative limitations on the export of fuels, particularly diesel, to address the decreasing stockpiles. However, it is important to note that the 25-day supply does not account for imports and domestic production, which have not been halted.
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The US Energy Information Administration (EIA) reported 106 million barrels of distillate fuel oils
On 21 October 2022, the US Energy Information Administration (EIA) reported that the stockpiles of diesel and other distillate fuel oils were 106 million barrels. This was the lowest for this time of year since 1982. The EIA's report also stated that distillate inventories were 26 million barrels lower than the seasonal averages for the previous ten years.
The EIA's report also noted that stockpiles were just 30 days' worth of demand at the end of July, the lowest seasonal level in monthly records dating back to 1945. Since then, stockpiles have decreased even further, reaching a record seasonal low of 25 days of supply in October. This has raised concerns about a potential diesel shortage in the US, especially as winter approaches and diesel is in higher demand for heating homes and road transport.
The recent supply shortage has been exacerbated by refinery strikes in France and other unforeseen outages in Europe and the US. The Permian Basin, the nation's top shale field, has seen productivity and volume slowdowns. Additionally, the US has reduced its domestic production of oil, with 1.2 million fewer barrels being extracted per day compared to the peak pre-Biden administration era. The embargo against the importation of fuel from Russia due to the invasion of Ukraine has also contributed to the reduced supply of diesel in the US.
To address the situation, the Biden administration has considered implementing administrative limitations on the export of fuels, particularly diesel, to encourage oil refiners to keep more fuel in the country. The increasing production of renewable diesel and biodiesel, which can be used as standalone fuels or blended with petroleum distillate, may also help to alleviate the diesel supply deficit in the US.
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Biden threatened oil companies with a tax on windfall profits if they don't reinvest in production
The United States is facing a diesel shortage, with reports suggesting that there are only 25 days of supply left. This is due to a combination of factors, including the invasion of Ukraine and the subsequent embargo on Russian fuel imports, as well as a decrease in domestic production. The Biden administration's policies have been blamed for the reduction in domestic production, with the current administration extracting 1.2 million barrels per day less than the peak pre-Biden production.
In response to the diesel shortage, President Joe Biden has threatened oil companies with a tax on their windfall profits if they do not reinvest in production. Biden accused oil companies of "war profiteering" and criticized them for making record profits while refusing to lower prices for American consumers. He argued that oil companies have a responsibility to act in the interest of their consumers, community, and country, and that they should invest in increasing production and refining capacity.
Biden's comments were directed particularly at ExxonMobil, which reported earnings of $19.7 billion in the third quarter. The company was criticized for using its profits to provide shareholders with dividends and stock buybacks instead of investing in production improvements. The President stated that if oil companies do not invest in increasing production, they will face a higher tax rate on their excess profits.
The oil industry has rebuked Biden's comments, arguing that increasing taxes on American energy will discourage investment in new production. American Petroleum Institute President Mike Sommers stated that "American families and businesses are looking to lawmakers for solutions, not campaign rhetoric." However, progressives and groups such as 'Stop the Oil Profiteering' have cheered Biden's comments, arguing that a windfall profits tax can provide immediate relief by redirecting money into the pockets of hardworking Americans.
While Biden has threatened a windfall tax, he does not have the unilateral power to impose it. He would need to work with Congress to pass a new law. With midterm elections approaching, high fuel costs are affecting the American economy and fueling voter resentment against the Biden administration.
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Refinery strikes in France and outages in Europe and the US have worsened the supply shortage
In 2022, there were concerns in the United States about a potential diesel fuel shortage. This was attributed to various factors, including the invasion of Ukraine and the subsequent embargo on Russian fuel imports, as well as reduced domestic production. While the exact number of days' supply was a subject of debate, some sources claimed that the US had a 25-day supply of diesel fuel, which was lower than the average supply during President Biden's term.
In the same year, France experienced refinery strikes that disrupted operations at several refineries and storage facilities. The CGT trade union demanded a 10% salary increase, investments, and the hiring of temporary workers from TotalEnergies, a French multinational integrated oil and gas company. These strikes led France to tap into its strategic fuel reserves, asserting that there were no shortages in supply due to the strikes. However, the strikes impacted production and deliveries, affecting service stations across the country, particularly in the north.
The French refinery strikes and outages in Europe and the US exacerbated the existing supply shortage. France's refineries processed around 1 million barrels per day of crude oil, accounting for 8.4% of Europe's total throughput. With France's refining sector facing outages and Europe undergoing a heavy oil refinery maintenance season, the supply of diesel in the region was expected to tighten.
The disruptions at French refineries due to strike actions caused concerns about tightening diesel supply in European markets. The strikes reduced output at the Normandy and Feyzin refineries and blocked shipments from the Donges and La Mede refineries. As a result, the profit margin for refining crude oil into diesel increased significantly. The absence of Russian diesel supplies due to the embargo further contributed to the expected tightening of diesel supply in Europe.
To compensate for the shortage, Europe increased imports from Asia, the Middle East, and the United States. However, despite these efforts, the refinery strikes in France and outages in Europe and the US have undoubtedly worsened the supply shortage, causing uncertainty in the refined oil trade and impacting the availability of diesel fuel across the regions.
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The US is facing a diesel crisis due to rising supply deficits and high fuel costs
The United States is facing a diesel crisis due to rising supply deficits and high fuel costs. According to the U.S. Energy Information Administration (EIA), distillate fuel stockpiles were at a record seasonal low of just 106 million barrels in October 2022, representing around 25 days' worth of supply. This figure is the lowest for this time of year since 1982 and is significantly below the seasonal averages of the previous decade.
The situation has been exacerbated by a wave of refinery strikes in France and unforeseen outages in Europe and the US, as well as reduced domestic production and the embargo on fuel imports from Russia following the invasion of Ukraine. High diesel prices, currently around $5.30 per gallon on average nationally, are expected to climb further, affecting the American economy and fuelling voter resentment against the Biden administration.
The Biden administration has warned oil companies that it will tax their "windfall" profits if they do not reinvest in production. White House officials are considering actions to encourage oil refiners to keep more gasoline and diesel in the United States, including administrative limitations on fuel exports. However, critics argue that the administration's policies have contributed to the reduction in domestic production, with America extracting 1.2 million barrels per day less than its pre-Biden peak.
While the interpretation of the 25-day supply figure has been disputed, with some arguing that it does not account for imports and domestic production, it nonetheless highlights the high demand and tight supply of diesel fuel in the US. The low inventory levels have been attributed to weak refinery capacity, global trade disruptions, and high demand. Mansfield Energy has issued a supply alert for the East Coast, noting that at 25 days of supply, there is critically low fuel available in the event of a crisis.
The diesel crisis is not limited to the US, with Europe also struggling to make enough diesel due to the embargo on Russian petroleum products. The situation is expected to worsen as winter approaches, as diesel is also used for heating homes.
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Frequently asked questions
No, America will not run out of diesel fuel in 25 days. The figure of 25 days of diesel fuel supply is true, but it is meant to show how much demand there is for diesel fuel and does not account for imports and domestic production.
The diesel fuel shortage in the US is due to a combination of factors, including reduced domestic production, refinery strikes, and the invasion of Ukraine, which has cut off imports of Russian oil.
The Biden administration has warned oil companies that it will tax their "windfall" profits if they do not reinvest in production. The administration is also considering actions to encourage oil refiners to keep more gasoline and diesel in the United States rather than exporting it.
Americans who own diesel cars are paying more at the pump, and prices are expected to continue rising. The diesel fuel shortage is also affecting the American economy and fueling voter resentment against the Biden administration.
It is difficult to predict the exact prospects, but industry experts and analysts expect prices to continue rising. There may also be regional shortages, and the situation will likely worsen as winter approaches, as diesel is also used to heat homes.
