Regan Brown
There have been claims on social media that the US will run out of diesel fuel in 25 days. However, this has been deemed false by energy experts. The days of supply metric measures the amount of distillate in storage compared to estimates of national demand. It does not consider the distillate fuel that will be produced and imported throughout the week. The US diesel supply is down about 15% compared to last year, and 31% compared to two years ago. This has resulted in higher diesel prices, especially in the Northeast.
| Characteristics | Values |
|---|---|
| Possibility of the US running out of diesel in 25 days | False |
| Reason for the claim | Misinterpretation of the "days of supply" metric by the media and social media |
| The actual meaning of the metric | The amount of distillate in storage compared to estimates of national demand |
| Average days of supply | 30 days |
| Factors contributing to the current supply and demand issues | The COVID-19 pandemic, shutdowns of oil refineries, sanctions on Russian oil, seasonal maintenance, etc. |
| Impact of low diesel supply | Higher prices, possible regional shortages |
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What You'll Learn
The 25-day supply figure is a benchmark for overall supply and demand
The 25-day supply figure is not a countdown to the United States running out of diesel fuel. Instead, it is a benchmark for overall supply and demand. The “days of supply” metric measures the amount of distillate in storage compared to estimates of national demand. It does not account for ongoing diesel production and imports, which continually replenish the supply.
The 25-day figure is calculated by taking the current U.S. inventory and dividing it by daily demand. It is typical for this time of year and has been influenced by several factors, including seasonal maintenance, the COVID-19 pandemic, and competition with Europe for energy as Western countries reduce their dependence on Russian gas.
While the supply is low compared to previous years, it does not indicate an imminent risk of the U.S. running out of diesel fuel. The situation could improve with refineries motivated by higher profits to increase production. Additionally, governments can take action to expedite fuel transport, as seen with emergency waivers issued by governors in South Dakota, Iowa, and Nebraska.
The misinterpretation of the 25-day figure on social media and by prominent figures like Tucker Carlson has caused concern among the public. However, energy experts have confirmed that the U.S. is not facing an immediate diesel shortage, and the claim that the country will run out of diesel in 25 days is false.
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The US diesel supply is down compared to previous years
The low supply of diesel in the US can be attributed to several factors. Firstly, the war in Ukraine has resulted in the loss of Russian imports, which previously boosted distillate supplies in the US. Secondly, the COVID-19 pandemic has impacted fuel availability, with some refineries shut down or converted into biofuel refineries. Additionally, seasonal maintenance and the competition with Europe for energy as Western countries reduce their dependence on Russian gas have contributed to the low diesel supply.
The low diesel supply has led to higher diesel fuel prices, especially in the Northeast region of the US, where stocks are the lowest. The increased demand for diesel fuel due to the Mississippi River drought and the upcoming winter season has further driven up prices. However, it is important to note that the US is not at risk of running out of diesel fuel completely. The days of supply metric does not account for ongoing diesel production and imports, and the situation is expected to improve.
The low diesel supply has also impacted the manufacturing sector in the US. The volume of diesel and other distillate fuel oils supplied to the domestic market rose marginally in the three months from June to August 2023 compared to the same period in 2022. However, the industrial downturn has been long, and distillate inventories remain below the long-term seasonal average. The soft manufacturing evident in October is likely to delay the expected recovery and the re-emergence of inflation.
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Diesel production will prevent a shortage
Despite claims that the US will run out of diesel fuel in 25 days, this is unlikely, and diesel production will prevent a shortage. The 25-day figure is based on data from the Energy Information Administration (EIA), which shows the number of days of diesel supply left in the US. However, this figure does not account for ongoing diesel production and imports, which will continue to replenish the supply.
The EIA's data is calculated by taking the current US inventory of diesel and dividing it by the daily demand. While it is true that diesel stocks are low, with the East Coast markets having less than 25 million barrels available compared to the usual 50 million, this does not mean that a shortage is imminent. Diesel production in US refineries will continue, and imports from other countries will help to fill any gaps in supply.
US petroleum refineries produce most of the diesel fuel consumed in the country. In 2022, US refineries produced about 1.75 billion barrels (73.46 billion gallons) of ultra-low-sulfur distillate (ULSD), which is used as diesel fuel and heating oil. While there may be short-term regional shortages, suppliers will rally to fill in any gaps, and governments can also act to expedite the transport of fuel.
The low diesel stocks are due to several factors, including seasonal maintenance, the effects of the COVID-19 pandemic, and competition with Europe for energy due to the war in Ukraine. Additionally, there is increased demand for diesel fuel due to the Mississippi River drought, which is forcing barge freight onto trucks, and the upcoming winter season, which will increase the demand for heating oil in the Northeast.
While the low diesel stocks may lead to higher prices, it is unlikely that the US will run out of diesel fuel in 25 days. Diesel production and imports will help to prevent a shortage, ensuring that the supply chain remains intact.
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Diesel prices will increase
Firstly, low stockpiles of diesel fuel contribute to rising prices. According to the U.S. Energy Information Administration (EIA), the East Coast markets, which usually have 50 million barrels in storage, currently have less than 25 million barrels available. This has led to concerns about potential regional shortages and has already resulted in higher prices.
Secondly, there is an increased demand for diesel fuel. The Mississippi River drought, for example, has led to more barge freight being transported by trucks, and a potential rail strike could further shift freight onto roads. Additionally, in the Northeast, the upcoming winter season will increase the demand for heating oil, which competes with diesel for fuel oil supplies.
Moreover, the war in Ukraine and the pandemic have significantly impacted the amount of fuel in U.S. reserves and their prices. The U.S. is also competing with Europe for energy as Western countries reduce their dependence on Russian gas. This competition has contributed to the rise in diesel prices.
While there were false claims that the U.S. would run out of diesel fuel in 25 days, this was a misinterpretation of EIA data. The "days of supply" metric only considers distillate in storage against estimated national demand, without accounting for ongoing production and imports.
As a result of these factors, diesel prices have already started to surge. According to the U.S. Energy Information Administration, the national average on-highway diesel price recently rose by 10 cents to $3.571. The Midwest saw an even larger increase of 11 cents, while the Gulf Coast and East Coast regions experienced 10-cent increases.
To conclude, diesel prices will continue to increase due to low stockpiles, increased demand, and geopolitical factors. While there is no immediate risk of a diesel fuel shortage, the combination of these factors will result in higher prices for consumers and businesses that rely on diesel fuel.
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Media and social media misinterpreted the 25-day figure
However, energy experts and analysts have refuted these claims, stating that the 25-day figure is not a finite amount but rather a supply that is continually being replenished by ongoing production and imports. The "days of supply" metric only considers the amount of distillate in storage compared to estimated national demand, without accounting for future production and imports. Patrick De Haan, a fuel analyst for GasBuddy, explained that the 25-day figure is an industry benchmark to assess supply and demand balances and does not imply a day-by-day countdown to zero.
The misinterpretation of the data has caused unnecessary alarm, as the US is not at imminent risk of running out of diesel fuel. While it is true that diesel supply is tight and prices are high, it is important to consider overall trends and historical contexts. For instance, the supply typically averages around 30 days, and in 2019, the number dropped to 26 days without resulting in a diesel shortage.
The low diesel stockpile can be attributed to various factors, including seasonal maintenance, the lingering effects of the COVID-19 pandemic, and competition with Europe for energy sources due to the war in Ukraine. Additionally, the Mississippi River drought has increased demand for diesel as barge freight shifts to trucks, and a potential rail strike could further impact supply.
While it is essential to be informed about energy supplies and their potential impact on the economy, it is crucial to rely on factual information and expert analysis rather than spreading misinformation that can cause undue panic. The US diesel supply is dynamic and influenced by various factors, and energy experts are closely monitoring the situation.
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Frequently asked questions
No. The 25-day figure is an industry benchmark to assess supply and demand balances and does not account for ongoing diesel production.
A handful of factors have contributed to the current supply and demand issues, including the COVID-19 pandemic, shutdowns of some oil refineries, and sanctions on Russian oil resulting from the war in Ukraine.
While the diesel shortage won't affect consumers at the pump, it could result in higher prices for goods in stores due to increased costs for logistics and delivery services.
Rural communities are bearing the brunt of the diesel shortage as farmers, who rely on diesel to fuel their equipment, cannot pass along fuel surcharges to their customers. This results in reduced profits or debt for farmers.
The Biden administration has been criticized for creating a hostile environment for oil and gas producers, leading to a decline in the number of refineries. Reforming the permitting process and supporting efforts to boost onshore and offshore oil production could help stabilize the supply.
