Katerina Swanson
The world's fossil fuel reserves are finite, and we are consuming them at an alarming rate. While the US isn't going to run out of diesel fuel in the short term, it has faced a diesel shortage, with supply and demand imbalances. This has led to concerns about rising prices and potential regional short-term shortages. The situation is complex, influenced by factors such as refinery maintenance, reduced refining capacity, sanctions on Russian oil imports, and seasonal demand. While the US won't run out of diesel fuel imminently, the broader issue highlights the need for sustainable alternatives to fossil fuels.
| Characteristics | Values |
|---|---|
| Days of diesel supply left in the US | 25 days |
| Date of estimation | October 28, 2022 |
| Reason for low supply | Impact of the Russian invasion of Ukraine on global energy supplies and imports |
| Reason for high demand | Used for heating homes in winter |
| Impact | Increase in diesel prices |
| Measures taken | The US is receiving ships carrying diesel from the United Arab Emirates |
| Biden administration considering limiting fuel exports | |
| US governors issuing emergency waivers for transporting fuel | |
| Possibility of the US running out of diesel | Unlikely, as the 25-day supply figure is an industry benchmark for overall supply and demand |
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What You'll Learn
The US won't run out of diesel fuel in 25 days
The US diesel fuel supply is "very tight", according to Patrick De Haan, head of petroleum analysis at GasBuddy. De Haan has clarified that the 25-day supply metric is completely inaccurate and is used as an industry benchmark to look at overall supply and demand balances. De Haan further states that the metric indicates that demand is eclipsing supply, but it does not mean that outages are imminent.
The 25-day supply figure has been misinterpreted by the media and social media users to mean that the US will run out of diesel fuel by Thanksgiving. However, this figure does not account for ongoing diesel production and imports. University of Houston energy lecturer Ed Hirs compared the situation to a grocery store that carries a week of milk, explaining that supply is always being replenished.
While the US is facing a diesel shortage, it is not to the point where widespread disruptions and outages will occur. The Biden administration has been taking steps to address the issue, such as considering limiting fuel exports and tapping into the country's emergency oil reserves. The diesel fuel supply chain is dynamic, and suppliers will work to fill in any gaps in supply.
Although the US won't run out of diesel fuel in 25 days, the low stockpiles will likely result in higher prices, especially in the Northeast region where stocks are the lowest.
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Diesel fuel supply is very tight
The diesel fuel supply in the US is "very tight", according to Patrick De Haan, head of petroleum analysis at GasBuddy. While the US is not going to suddenly run out of diesel fuel, the tight supply does mean that people could pay higher prices at the pump and energy prices could climb.
The US had 25.8 days' worth of diesel in its stores as of 28 October 2022, according to the Energy Information Administration (EIA). This is the lowest level since 2008. The EIA figure is a measurement of supply and demand and does not account for ongoing diesel production. The number is used as an industry benchmark to look at overall supply and demand balances.
The low supply has been caused by a combination of factors, including strong domestic and foreign demand, shrinking domestic refining capacity, and sanctions on Russian oil imports. The US refinery capacity has fallen in the past few years as some unprofitable refineries were closed. The US is facing a diesel shortage that could increase the price of fuel this winter if the inventory isn't replenished soon.
The Biden administration has been considering limiting fuel exports to lower consumer prices. The administration has also tapped the country's emergency oil reserves to counter rising natural gas prices. However, there are concerns about the long-term efficacy of this strategy.
While the US is not facing an imminent diesel shortage, there could be some short-term regional shortages of fuel. Mansfield Energy's Alan Apthorp wrote that some cities might run dry on diesel for a few days, but the fuel supply chain is dynamic, and suppliers will fill in any gaps in supply. Governments can also act to help expedite the transport of fuel, such as by issuing emergency waivers of hours-of-service rules for truckers transporting fuel.
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The US diesel shortage is due to the Russian invasion of Ukraine
The US diesel shortage has been attributed to a multitude of factors, including the Russian invasion of Ukraine. In February 2022, Russia's full-scale invasion of Ukraine disrupted global crude oil and petroleum product markets. As a result, crude oil prices soared to their highest levels since 2014, impacting diesel prices in the US.
Russia has historically been Europe's largest supplier of diesel. However, since the EU implemented a ban on petroleum product imports from Russia in February 2023, exports of diesel from Russia to Europe have plummeted by 96%. This has contributed to a tightening of the global diesel market, affecting the US as well.
The US diesel shortage is further exacerbated by sanctions on Russian oil imports, which have reduced the supply of diesel available to the US market. Additionally, the war in Ukraine has impacted the supply of urea, a key ingredient in diesel exhaust fluid (DEF). Russia is a major exporter of urea, and the invasion of Ukraine has disrupted the global supply chain, leading to a potential DEF shortage in the US.
Furthermore, the US diesel shortage is partly due to disinvestment in refining capacity during the pandemic and elevated natural gas prices, which have reduced refining margins. The limits on the export of refined products from the EU to Russia following the Ukraine war have also played a role in the diesel shortage.
While the Biden administration has considered limiting fuel exports to lower consumer prices, it is important to note that such actions may have unintended consequences, including reduced inventory levels and upward pressure on consumer fuel prices. The US is exploring various options to address the diesel shortage, including enhancing its refinery capacity and tapping into emergency oil reserves.
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The US diesel shortage will increase prices
The US diesel shortage will likely increase prices in the short term, as demand outstrips supply. In October 2022, the US had 25 days of diesel supply remaining, the lowest level since 2008. This shortage was caused by several factors, including disinvestment in refining capacity during the pandemic, elevated natural gas prices reducing refining margins, and limits on the export of refined products from the EU to Russia following the Ukraine war.
As a result of these factors, diesel prices in the US have been surging. According to Patrick De Haan, the head of petroleum analysis at GasBuddy, "prices at the pump" will increase, and "energy prices could climb" due to the diesel shortage. De Haan also noted that the diesel supply is "very tight," indicating that supply is struggling to keep up with demand.
The Biden administration has considered limiting fuel exports to lower consumer prices in response to the diesel shortage. However, this action may have unintended consequences, as the American Petroleum Institute and US fuel and petrochemical makers warned in a joint letter. They stated that banning or restricting exports could "reduce inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate US allies in wartime."
The diesel shortage is expected to keep inflation and heating bills high in the US through the winter of 2022-2023. As winter approaches, demand for diesel to heat homes is expected to rise, causing an increase in prices. The US is facing a "diesel crunch" just before the winter surge in demand, putting upward pressure on prices.
While the US diesel shortage is likely to increase prices in the short term, there are potential alternatives that could alleviate the situation. Renewable diesel production is projected to increase, with anticipated averages of 230,000 b/d in 2024 and 290,000 b/d in 2025, marking annual increases of nearly 30%. Biodiesel and renewable diesel can emerge as prominent alternative energy sources within commercial transportation due to their sustainability, reducing dependence on conventional fossil fuels. However, their mass application is still far away, as the market is in the developing stages, and production capacities are currently negligible compared to conventional diesel.
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The US diesel supply is at its lowest level since 2008
The US diesel supply is facing a critical situation, with estimates suggesting that the country has only about 25 days of diesel supply left as of late October 2022. This level of supply is the lowest it has been since 2008, sparking concerns about a potential economic crisis. The National Economic Council Director, Brian Deese, described the situation as having "unacceptably low" diesel inventories.
The primary factors contributing to the low diesel supply in the US include the impact of the Russian invasion of Ukraine on global energy supplies and imports, as well as seasonal refinery maintenance. The ban on imports from Russia has significantly affected the diesel market, causing a supply crunch. Additionally, there is a surge in demand for diesel, with the upcoming winter season expected to further increase demand for heating homes.
The Biden administration is considering various options to address the diesel shortage. One approach is limiting fuel exports to lower consumer prices. The administration has also tapped into the country's emergency oil reserves to counter rising natural gas prices. However, there are concerns about the long-term efficacy of this measure. Another suggestion is setting minimum inventory levels, but this could have complex implications for inflation and energy security both domestically and internationally.
The low diesel supply has significant implications for the US economy. Diesel plays a crucial role in the country's supply chain, powering heavy-duty freight trucks that transport essential goods like food and medical supplies. Experts predict that the low supply will lead to higher prices for diesel, which will, in turn, increase the cost of delivering goods. This could result in higher prices for consumers across the board.
While some have expressed concerns about the US running out of diesel fuel entirely, experts have refuted these claims. They clarify that the 25-day supply metric is an industry benchmark to assess the balance between supply and demand. While the situation is tight and prices are expected to rise, a complete outage is unlikely. The market is anticipated to correct itself, with crude oil producers expected to divert more of their supply to diesel production to meet the increased demand.
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Frequently asked questions
While the US faced a diesel shortage in 2022, it is unlikely that the country will run out of diesel fuel completely. The diesel supply in the US was at 25 days, its lowest level since 2008, but this does not mean that the US will run out of diesel fuel in 25 days. This number is used as a benchmark to understand supply and demand balances.
The diesel shortage in 2022 was caused by a combination of factors, including high demand, low refining capacity, sanctions on Russian oil imports, and seasonal refinery maintenance.
The diesel shortage led to higher prices for diesel fuel and put the system under strain.
To address the diesel shortage, the Biden administration considered limiting fuel exports and tapping into the country's emergency oil reserves. The administration also received shipments of diesel fuel from the United Arab Emirates.
