Katerina Swanson
In November 2022, the United States faced a potential diesel shortage, with the country's diesel supply at 25.8 days' worth, a decrease from previous weeks. However, experts asserted that the US would not run out of diesel, as the figure did not account for ongoing diesel production. While the US has not faced a diesel shortage, diesel futures hit a three-year low in September 2024, with ULSD futures settling at $2.06 per gallon, the lowest since August 2021. This decrease in diesel prices can be attributed to lower crude oil prices, with crude oil accounting for around 50% of end consumer prices of diesel.
| Characteristics | Values |
|---|---|
| Is America low on diesel fuel? | In November 2022, experts confirmed that the U.S. will not run out of diesel fuel despite having a 25-day supply at the time. |
| Diesel prices in America | In December 2024, the average price of diesel in the U.S. was $3.49 per gallon, a 24-month low. |
| Diesel demand | Diesel is mostly used in industrial activities and heavy-duty trucks. Demand for diesel is declining due to the growing use of alternative fuels, such as LNG-powered trucks. |
| Diesel supply | Diesel supply in the U.S. was lower than usual in November 2022 due to seasonal maintenance, the lingering effects of the COVID-19 pandemic, and competition with Europe for energy. |
| Diesel production | The U.S. produces more diesel every day, according to energy researcher Carey King. |
| Diesel taxes | In the U.S., taxes on diesel fuel are higher than on heating oil. Tax rates vary between states. |
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What You'll Learn
Diesel prices are influenced by crude oil costs
Diesel fuel prices are influenced by a multitude of factors, including the price of crude oil, the availability of refinery capacity, and environmental regulations. The cost of crude oil is the most significant factor in diesel fuel prices. From 2004 to 2023, the cost of crude oil accounted for around 50% of the monthly average US retail on-highway diesel fuel prices. The price of crude oil is determined by factors such as production costs, global demand, and political stability. For instance, political tensions in the Middle East often lead to spikes in crude oil prices.
The price of diesel fuel is also influenced by the availability of refinery capacity. Refinery outages can cause supply disruptions and impact diesel fuel prices, particularly in isolated markets like the West Coast liquid fuels market in the US. Additionally, environmental regulations can affect the cost of refining diesel fuel by requiring more expensive processes or additives, which ultimately gets passed on to the consumer in the form of higher prices.
Demand is another critical factor influencing diesel fuel prices. Diesel fuel is primarily used in industrial activities, tying its consumption closely to manufacturing growth. When demand for diesel fuel is high, prices tend to rise due to increased competition for the limited supply. Seasonal variations in demand, such as increased heating oil demand during colder months, can also impact diesel fuel prices. Additionally, the transition to ultra-low-sulfur diesel (ULSD) has caused infrastructural complications, affecting diesel fuel prices.
Distribution costs also play a role in diesel fuel prices. Diesel fuel is not as refined as gasoline, making it more expensive to transport and store. The process of distribution involves multiple stages, from the refinery to terminals to fuel stations, and these costs are ultimately passed on to the consumer. Taxes and government policies can further impact diesel fuel prices. Federal and state taxes on diesel fuel vary across different regions and can significantly influence the final price.
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The US has a 25-day supply of diesel
As of 8 November 2022, the United States had approximately a 25-day supply of diesel fuel. This figure was calculated based on data from the Energy Information Administration (EIA) and did not account for ongoing diesel production. While it indicates a lower supply than in previous weeks, experts confirmed that the US will not run out of diesel fuel soon.
The 25-day figure is not a day-by-day countdown to zero; instead, it changes by fractions of a percentage point weekly. According to fuel analyst Patrick De Haan, the supply level had reached "uncomfortable territory", but it was not indicative of an impending shortage. De Haan attributed the lower supply levels to various factors, including seasonal maintenance, the lingering effects of the COVID-19 pandemic, and competition with Europe for energy amid the reduction of Russian gas imports due to the Ukraine-Russia conflict.
The decline in diesel supply is also influenced by a decrease in distillate fuel consumption in the US. This reduction in demand is partly due to economic concerns, such as slowing job growth, and the growing use of alternative fuels. Additionally, the high prices of diesel fuel, which are primarily determined by the cost of crude oil, have contributed to concerns about supply levels.
While the US diesel supply situation is not as dire as some social media users have claimed, it is important to recognise that the supply levels are lower than usual. The average supply of diesel fuel typically hovers around 30 days. However, this figure can fluctuate due to various factors affecting production and consumption.
In summary, the US faced a lower-than-average diesel supply of approximately 25 days in November 2022. While this situation is not ideal, it does not indicate an imminent threat of the country running out of diesel fuel. Experts emphasised that diesel production continues daily, and the supply levels fluctuate gradually. The lower supply can be attributed to a combination of economic, pandemic-related, and energy market factors.
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Diesel engines are more expensive to run
As of September 2024, US diesel futures hit a three-year low, with ULSD futures settling at $2.06 a gallon, the lowest since August 2021. This can be attributed to weak economic activity in the US and China, the top oil consumer and top importer, respectively, as well as a growing shift towards alternative fuels.
While diesel engines are known for their higher fuel efficiency compared to gasoline engines, there are several reasons why they may be more expensive to run:
Higher Initial Cost
Diesel engines tend to be significantly more expensive than their gasoline counterparts, which can be a deterrent for many consumers. The higher cost is partly due to the need for fuel injection, which used to be expensive and less reliable. Additionally, diesel engines have higher compression ratios, resulting in stronger and heavier components, such as the crankshaft, pistons, and bearings.
Fuel Availability and Taxation
Diesel fuel is generally less readily available than gasoline. In certain countries, such as the United States, Europe, and Canada, taxes on diesel fuel are also higher than those on heating oil or gasoline, further contributing to the overall cost of running a diesel engine.
Maintenance and Repair Costs
Services and repairs for diesel engines can be more expensive due to the higher cost of replacement parts. Additionally, diesel engines may require the use of glow plugs in cold weather, which means waiting for the plugs to heat up before starting the engine. This can be inconvenient and impact the overall operational efficiency of the vehicle.
Environmental Concerns
Diesel engines typically produce more smoke and emissions than gasoline engines, particularly older diesel engines. This has led to a push for ultra-low-sulfur diesel (ULSD), which has caused infrastructural complications and increased production costs.
Performance Considerations
While diesel engines offer higher torque and better fuel economy, gasoline engines often have higher horsepower. In certain applications, such as government fleets, the higher torque of diesel engines may not provide a significant advantage over gasoline engines. Therefore, the higher cost of diesel engines may not always be justified by their performance.
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Diesel is used in heavy trucks
Diesel engines are commonly used in heavy vehicles such as large trucks, buses, and trailers. Diesel fuel is thicker and burns slower than gasoline fuel, making it more suitable for heavy vehicles. Gasoline engines have a low RPM, causing the fuel to burn rapidly in larger vehicles. In contrast, diesel fuel burns at a slower rate, providing better fuel economy, which is crucial for industrial vehicles.
Diesel engines are known to be more powerful than gasoline engines, and they offer higher torque output, which is essential for heavy vehicles to move, even at slow speeds. The higher torque in diesel engines is due to their ability to produce high torque figures reliably and economically. This high torque allows diesel engines to generate enough power to move heavy vehicles at any speed. Additionally, diesel engines are more fuel-efficient than gasoline engines, with diesel engines using about 30% less fuel energy to produce the same output energy.
Historically, diesel fuel was also cheaper than gasoline, making it a more economical choice for heavy vehicles. While diesel engines are commonly used in heavy trucks, they are not limited to them. Diesel engines are also used in buses, trains, submarines, tractors, and other heavy load vehicles. Proper maintenance of diesel engines is crucial to ensure their longevity and optimal performance in these heavy vehicles.
In terms of the diesel fuel market in the United States, there are some concerns about declining demand. U.S. diesel futures have hit a three-year low, with signs of weak economic activity and a growing preference for alternative fuels, particularly liquefied natural gas (LNG) for trucking. The U.S. Energy Information Administration has lowered its forecasts for distillate fuel consumption, which includes diesel, citing economic concerns and the increasing use of alternative fuels. However, it is important to note that the diesel fuel market is dynamic, with various factors influencing its supply, demand, and pricing.
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Diesel demand is declining
The demand for diesel in the United States is on a downward trajectory, with a variety of factors contributing to this trend. Firstly, there has been a shift towards alternative fuels, such as liquefied natural gas (LNG), which is gaining traction in the trucking industry. China's LNG-powered truck fleet is expanding rapidly, and similar trends may be observed in other countries, including the United States. This shift away from conventional diesel is expected to continue, as the market share of biofuels is projected to grow.
Economic factors also play a significant role in the declining demand for diesel. Weak economic activity in the U.S. and China, the top oil consumer and importer, respectively, has weighed heavily on oil and fuel markets. Slowing job growth and economic concerns in the U.S. have contributed to lower forecasts for distillate fuel consumption, which includes diesel and heating oil. Additionally, high diesel prices, influenced by crude oil prices and supply restrictions, have further reduced demand.
The environmental impact of diesel engines has also influenced the decline in demand. The ""Dieselgate" scandal, which revealed the use of cheat devices in some diesel vehicles, damaged the reputation of diesel technology. Diesel engines are associated with higher emissions of harmful nitrogen-oxide (NOx) compared to gasoline engines, and efforts to improve air quality, such as California's emissions standards, have encouraged the exploration of alternative fuel sources.
While the demand for diesel in the U.S. is declining, it is important to note that diesel-powered heavy-duty trucks still dominate the market. About 76% of heavy-duty trucks on U.S. roads use diesel power, and the unique characteristics of diesel engines, such as higher torque and better fuel efficiency, continue to make them a popular choice for certain applications. However, the rise of electric vehicles and the increasing competitiveness of electric big rigs in terms of running costs may further challenge the demand for diesel in the future.
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Frequently asked questions
As of November 2022, the U.S. had a 25-day supply of diesel, which is low by historical standards. However, the country will not run out of diesel soon as more diesel is produced daily.
The low supply can be attributed to seasonal maintenance, the lingering effects of the COVID-19 pandemic, and competition with Europe for energy.
A low diesel supply may cause outages in individual fuel stations, particularly in the Northeast and Mid-Atlantic regions. However, these outages are typically brief and not indicative of broader shortages.
Diesel prices are primarily determined by the cost of crude oil, which regularly accounts for around 50% of end consumer prices. Other factors include supply restrictions and weak demand outlooks.
