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Diesel shortage likely to trigger cost spikes across nation – Minot Daily News

Nov 5, 2022
Charles Crane/ MDN Signage at Schatz Crossroads in Minot on Friday displays the current price of fuel.
After a year of American’s pocketbooks smarting from rising fuel prices and inflation, it was recently reported that the United States’ supply of diesel fuel was dipping down to crisis levels just as the winter season is taking hold.
A recent report released by the Energy Information Administration announced that distillate inventories of diesel, jet fuel, and heating oil have dipped down to a 25-day supply, the lowest levels ever recorded in the month of October. This shortage has been blamed on a number of factors, including decreased refinery output, and increased demand both at home and abroad in the aftermath of the COVID-19 lockdowns and Russia’s invasion of Ukraine. Many headlines painted a grim picture where the diesel supply would hit zero in 25 days, bringing society to a complete stop.
What that 25-day number actually represents is how long the current distillate inventories would last if refinery production ceased completely. Patrick De Haan, head of petroleum analysis at GasBuddy, cautioned in a tweet that while supply numbers have dropped to historical lows, the public shouldn’t interpret it as an indication that we are on the verge large scale outages.
“It is more of a sign that refiners are having a hard time keeping up as that number is usually 33 days, and has dropped to numbers historically low. If refiners can outpace demand, the number will only rise, but again, this number does not mean outages are imminent,” De Haan said.
That said, experts are predicting the diminished inventory and high demand for distillates during the winter months will cause the most strain on the East Coast of the United States where a large number of homes depend on diesel fuel to heat their homes. Unfortunately, the rest of the nation will not be spared from the consequences, and most likely will feel the pain in the prices they find on store shelves this holiday season.
After the nation reached a blistering high of $5.81 per gallon of diesel at the end of June, the current price has dipped down to $5.31, but experts expect the price to rollercoaster back up. Due to a breakdown of negotiations between the major railroad companies and rail worker unions, the nation faces the very real possibility of a rail worker strike happening as early as Nov. 19.
Barring another intervention by the Biden Administration, such a strike would hobble and already humbled economy. In the event a strike occurs, the demand for trucking and air transport would increase and consequently drive up the prices of the products and items they move.
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Joseph Muongi

Financial.co.ke was founded by Mr. Joseph Muongi Kamau. He holds a Master of Science in Finance, Bachelors of Science in Actuarial Science and a Certificate of proficiencty in insurance. He's also the lead financial consultant.