Katerina Swanson
The US diesel fuel supply has been facing a crunch in recent years, with the country having just 25 days of diesel fuel supply left as of October 2022, the lowest level since 2008. This shortage has been attributed to various factors, including the ban on Russian imports due to the Ukraine war, refinery outages, and strong demand from Europe. The Biden administration has considered limiting fuel exports to control consumer prices, and the market is adjusting to efficiently distribute diesel fuel. While there are concerns about future oil production, retailers do not foresee a near-term alarm, and the diesel supply is expected to rebound.
| Characteristics | Values |
|---|---|
| Average daily supply of diesel fuel | 33 days |
| Diesel supply in the US | 25 days |
| Diesel price in the US | $5.30/gal |
| Diesel price in the North East | $5.34/gal |
| Year with record-high finished motor gasoline consumption | 2018 |
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What You'll Learn
Diesel fuel demand and supply
Demand for diesel fuel is closely tied to economic trends, particularly in the transportation and agriculture sectors. Diesel is widely used in commercial vehicles, and the demand from these sectors can impact prices. For example, high-volume truck stops often offer lower diesel prices than smaller-volume service stations due to their ability to cater to large commercial vehicles. Additionally, seasonal swings in farmers' demand for diesel fuel can influence prices, with fluctuations occurring during different times of the year.
Geopolitical events, such as the Russian invasion of Ukraine, have also significantly impacted diesel fuel supply and demand. The conflict led to a reduction in Russian oil imports by the United States and other countries, contributing to a global energy supply crunch. This resulted in increased diesel prices and concerns about potential shortages. The war in Ukraine also caused seasonal fluctuations, as some countries use heating oil, similar to diesel fuel, to warm their homes during the winter months.
The supply of diesel fuel is influenced by refinery capacity and production. Refinery outages and maintenance can disrupt supply and impact prices. For instance, the United States experienced refinery capacity issues during the pandemic, with some refineries closing permanently. Additionally, the implementation of new regulations, such as the Clean Air Act Amendments of 1990, which mandated a reduction in the sulfur content of diesel fuel, can affect supply and demand dynamics by increasing operating and capital costs for refiners.
The interaction between supply and demand determines diesel fuel prices. When diesel inventories are low or declining, wholesalers and marketers may bid higher for available supplies, leading to increased prices. The transportation system's ability to efficiently distribute supplies across regions also influences pricing, with areas farther from production sources, like the Gulf Coast, typically facing higher diesel fuel prices.
In conclusion, diesel fuel demand and supply are complex and interrelated. Economic trends, seasonal variations, geopolitical events, refinery capacity, and regulatory factors all play a role in shaping the diesel fuel market. Understanding these factors is crucial for managing diesel fuel resources effectively and ensuring a stable supply to meet demand.
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The impact of the Russia-Ukraine conflict
In 2022, the United States faced an acute shortage of diesel fuel, with supplies estimated to last for only 25 days, the lowest level since 2008 and 2014. This situation was exacerbated by the Russia-Ukraine conflict, which led to a ban on Russian oil imports to the US and contributed to a global energy supply crunch. The conflict has had a significant impact on diesel fuel supply and prices:
Impact on Diesel Fuel Supply
The Russia-Ukraine conflict has disrupted global energy supplies, with the US and other countries cutting off Russian oil imports. This has directly contributed to the diesel fuel shortage in the US. The reduction in imports has drained US diesel fuel inventories, which were already low due to refinery outages and strong demand from Europe as it seeks to reduce its dependence on Russian energy.
Impact on Diesel Fuel Prices
The conflict has caused a sharp increase in oil and gas prices worldwide, with prices skyrocketing to over $110 per barrel. This has resulted in higher diesel fuel prices in the US, with prices surging by $1 to $2 per gallon compared to gasoline. The increased prices have contributed to higher inflation and heating costs for consumers, as diesel fuel is used for transportation and home heating, especially during the winter season.
Measures to Address the Shortage
The US government has considered various measures to address the diesel fuel shortage and lower consumer prices. These include limiting fuel exports and working with state governments to decrease or suspend federal taxes on diesel fuel. However, it is important to note that the interpretation of the 25-day supply as a massive emergency has been disputed, as it simply indicates the demand for diesel fuel rather than an imminent depletion of refineries.
Global Impact on Fuel Prices
The Russia-Ukraine conflict has impacted fuel prices globally, with wholesale motor fuel prices in Europe surging compared to 2018/2019. This has affected various types of fuel, including UCOME (used cooking oil methyl ester) and TME (tallow methyl ester), which reported the largest price increase of over 133% in May 2022. The dynamic of the energy market has changed, and the risk of disruption to supplies has further increased price pressures.
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Refinery outages and maintenance
For instance, in 2022, the United States faced a diesel shortage that was partially attributed to refinery seasonal maintenance and outages. This contributed to surging diesel prices and heightened concerns about the stability of the country's diesel supply. The situation was further exacerbated by the ban on imports from Russia following the Russian invasion of Ukraine, reducing the available diesel fuel supply.
The impact of refinery maintenance and outages on diesel supply and prices is not limited to the United States. In 2025, reports indicated surging gasoline prices on the West Coast due to refinery maintenance and outages, creating a ripple effect on neighboring states. This trend was expected to spread to other regions as refinery maintenance and the transition to summer gasoline blends would likely drive prices higher nationwide.
Refinery maintenance and outages can have both immediate and long-term effects on diesel fuel supply and pricing. In the short term, outages can lead to reduced production and supply disruptions, causing rapid price increases. In the long term, refineries may struggle to recover their full operational capacity, especially if they have faced extended shutdowns or significant damage. This can result in prolonged supply constraints and continued pressure on diesel prices.
While refinery maintenance and outages are necessary for the safe and efficient operation of refineries, they can also create challenges for maintaining stable diesel fuel supplies. To mitigate these challenges, refineries must optimize their maintenance practices, minimize unplanned outages, and effectively manage their operations to ensure a consistent diesel fuel supply for consumers.
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Diesel price surge
Diesel prices in the United States have been surging due to a combination of factors, including low inventories, limited supply, strong demand, and the impact of the Russia-Ukraine conflict on global energy supplies.
In late October 2022, reports emerged that the US had only 25 days of diesel supply left, the lowest level since 2008 (or 2014, according to some sources). This shortage was attributed to various factors, including refinery outages, reduced refinery capacity due to the pandemic, seasonal maintenance, and the ban on Russian imports following the invasion of Ukraine. As a result, diesel prices were expected to continue rising, keeping inflation and heating bills high during the winter.
The diesel price surge has impacted different regions of the US differently. The Midwest generally experienced the largest diesel price increases, with a 3-cent rise to $3.519, later increasing further to $3.579. The Rocky Mountain region saw the second-largest spike, with prices rising by 6 cents to $3.472, and later to $3.499. The West Coast also witnessed notable increases, with prices initially rising by 3 cents to $4.259, then by 6 cents to $4.318, with the highest gas rise of $4.320. Excluding California, West Coast prices rose by 6 cents to $3.811 and then to $3.876.
The Gulf Coast experienced more modest increases, with prices initially rising by 2 cents to $3.282, then by another 6 cents to $3.338. The East Coast saw the smallest jumps, with a 2-cent increase to $3.695, later rising to $3.713. According to AAA Motor Club, the national diesel price average was $3.598, slightly higher than the EIA's estimate, and this average continued to climb in subsequent weeks.
While the immediate future saw diesel prices continuing to rise, there were also predictions that prices would eventually stabilize and remain lower than the previous year. This was attributed to factors such as tepid gasoline demand, weak crude oil prices, and increased crude oil inventories. However, the approaching summer season was expected to bring about seasonal increases in diesel prices.
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Government intervention
In October 2022, the US faced a diesel supply crunch, with only 25 days of diesel supply remaining—the lowest level since 2008. This shortage was attributed to various factors, including the ban on Russian imports following the invasion of Ukraine, refinery outages, and strong demand from Europe. In response to this crisis, government intervention was deemed necessary to prevent further economic fallout.
The US government recognised the urgency of the situation, with National Economic Council Director Brian Deese acknowledging the "unacceptably low" diesel supplies. Deese assured the public that "all options are on the table" to address the issue. One of the tools at the government's disposal was the Northeast Home Heating Oil Reserve, capable of storing 1 million barrels of diesel for emergency supply.
The Biden administration considered limiting fuel exports to alleviate the strain on domestic supplies and lower consumer prices. This strategic decision aimed to prioritise the needs of US citizens amidst the supply crunch. Additionally, President Joe Biden utilised the Strategic Petroleum Reserves to try to push fuel prices lower, although this move was criticised by some as being too rapid and excessive.
While the government interventions provided temporary relief, the structural problems within the diesel supply chain persisted. The COVID-19 pandemic had reduced US refinery capacity, with many refineries closing down or struggling to reopen. A refinery fire in Pennsylvania in 2019 further exacerbated the issue. Moreover, seasonal fluctuations, such as the approaching winter in the Northeast, contributed to the heightened demand for diesel fuel, as it is also used for heating homes.
The government's interventions were aimed at mitigating the immediate impacts of the diesel shortage, but they also served as a wake-up call for the industry to address the underlying vulnerabilities in the diesel supply chain. The crisis highlighted the need for a more sustainable and resilient approach to energy supplies and refining capacity in the US.
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Frequently asked questions
As of October 2022, the US had around 25 days of diesel fuel supply left. This is the lowest level since 2008.
There are several reasons for the low number of days of diesel fuel supply in the US, including:
- Refinery outages and reduced refinery capacity due to the pandemic.
- Increased demand from Europe as they attempt to cut off Russian supplies due to the Ukraine war.
- Seasonal fluctuations, such as increased demand for heating oil during the winter.
- Sanctions on Russian oil imports.
The average daily supply of diesel fuel in the US is typically around 33 days.
A low number of days of diesel fuel supply can result in increased prices for diesel fuel, as well as higher costs for transporting goods, which can contribute to inflation. There may also be regional variations, with some areas experiencing temporary disruptions or running out of diesel for a day or two.
