The U.S. diesel supply reached its lowest levels since 2008 at the beginning of November, stirring panic over supply chain woes and fuel price increases that have become all too familiar to Americans in 2022.
Energy analysts attribute the shortage to supply disruptions triggered by Russia’s invasion of Ukraine and reduced refinery capacity because of regular fall maintenance and the loss of a major East Coast refinery to a 2019 fire. Republicans are citing the shortage as a last-minute campaign jab at President Joe Biden and Democrats’ green policy initiatives.
According to the Energy Information Administration, low distillate fuel inventories, which include diesel, jet fuel and heating oil, could push diesel prices close to $5 per gallon, even though the national price of gasoline has dropped below $4 per gallon. Since diesel is the primary fuel source for vessels that transport most consumer goods, increased prices are likely to bleed into other goods, too.
“This issue has been building for a long, long time,” said Dan Kish, senior fellow at nonprofit Institute for Energy Research. “I can tell you that we who track markets and commodities saw this coming months ago.”
And the distillate shortage is only just starting to “rear its ugly head,” Kish added. The lack of inventory is likely to continue to wreak havoc on industries like trucking and farming, especially as heating oil usage increases over the upcoming winter months.
The war in Ukraine, which has halted distillate imports from Russia, is one of the largest strains on the diesel supply. Prior to Russia’s invasion of Ukraine, most of the U.S. energy imports from Russia were finished products and refinery inputs that boosted distillate inventories in the U.S.
While the shortage is nationwide, the East Coast will likely feel the distillate pinch the most. New England could be especially hard his because it lacks natural gas infrastructure and electricity can be prohibitively expensive for extremely cold climates.
Northeastern states are also struggling to meet diesel demand due to lost capacity after a fire at a Philadelphia refinery in 2019, causing some stations in the region to potentially run out of diesel.
But acute shortages are already hitting Southeastern states as well, according to Georgia-based fuel-supply company Mansfield Energy.
The shortage caused the company to announce in late October that it was placing the entire Southeast on what it called a “Code Red” status, requiring 72-hour notice for deliveries when possible.
Harvest time
Farmers, who rely on diesel for tractors and other machinery, are being hit by high diesel prices amid their fall harvesting season.
“If you take a step back from what’s happening, whether it’s with wind and solar or with these problems with optimal energy, we’re becoming more and more weather dependent,” Kish said. “How bad this situation gets will be determined by weather and economy.”
And the issue is likely one that will follow lawmakers back to Capitol Hill during the lame duck, as many Republicans have used the diesel shortage as another cudgel to attack the Biden administration and Democrats’ pro-renewable energy policies.
“First, it was baby formula, and now experts are warning of a potential diesel shortage. Now is the time for the Biden administration to take this seriously — immediately,” Sen. Marsha Blackburn, R-Tenn., wrote on Twitter last week. Cory Mills, a Republican candidate for Florida’s 7th District also tweeted about the diesel shortage, blaming it on “Biden/ Dems attack on American fossil fuel.”
Minority Whip Steve Scalise, R-La., also warned that the diesel shortage is threatening to crush “the backbone of our economy” in a Nov. 2 tweet. A day later, Rep. Ted Budd, R-N.C., sent a letter to Biden specifically blaming the White House’s cancelation of the controversial Keystone pipeline and other policies that are “artificially restricting the main ingredient in diesel fuel.”
“In June 2020, you promised to ‘end fossil fuels.’ Two years later, the American people are paying the price for this radical policy,” Budd wrote. “I urge you to cease your Administration’s war on energy and reverse policies that restrict the supply of domestic energy production.”
The Biden administration has made some moves to relieve diesel prices, including diverting at least two ships in October carrying a total of some 90,000 tons of diesel and jet fuel from their original destinations in Europe to the East Coast. But many are still concerned that the barrels on their way won’t be able to supply the U.S. through the winter.
The White House has not announced any further moves to restore inventory.
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