Bad News About the U.S. Diesel Supply

Matt Posky
by Matt Posky
bad news about the u s diesel supply

Over the summer, the United States witnessed record fuel prices. But the elephant in the room wasn’t how much people were having to pay for regular unleaded gasoline, it was the possibility that the nation might run into diesel shortages going into the fall.


Global deficits had manifested in March and people who watch the market professionally were growing increasingly concerned. By September, it began to look like the U.S. had dodged that particular bullet. However, the Energy Information Administration (EIA) recently announced that America only has about 25-day supply during a period of elevated demand. 


The present national average for diesel fuel is around $5.34 per gallon – up from $1.67 per gallon this time last year – which had already risen dramatically against 2020. That is unfortunate but it doesn’t become a genuine crisis until you also take into account that the 25-day supply (give or take) represents the smallest U.S. stockpile since 2008. Under normal circumstances, America usually has somewhere between 35 and 55 days worth of fuel to work with. 


Viewed broadly, this will assuredly mean higher shipping costs and retailers raising their prices to make up the difference. Farming and construction costs are also being impacted. Though the situation changes somewhat depending on where you’re filling up your tank. The East Coast has endured sustained shortages for most of the year and saw diesel stockpiles in the 14-day range back in May. However, the highest prices have been in California, where diesel is rarely sold for less than $6.50 per gallon these days. 


If you’re wondering what’s causing the problem, there’s a laundry list of reasons we could go through. We’ve entered into refinery maintenance season and colder weather means at least some of the fuel will be used for heating, further increasing demand. U.S. refineries have also tamped down diesel production generally while exporting more of it out of the country than usual. Some of this was due to the sudden change in regulatory measures after the Biden administration got involved, upending oil production and refinement schedules in 2021. But the Russo-Ukrainian War has likewise driven up demand globally and harmed production as energy prices skyrocket in Europe. 


While absolutely terrible news for most people, American oil refiners are now seeing the best diesel margins in recorded history. The profit for transforming a barrel of crude into a barrel of diesel is now $86.50. That’s up by roughly 450 percent against the 2000-2020 average of just $15.70 per barrel, according to OilPrice.com.


On Wednesday, National Economic Council Director Brian Deese told Bloomberg TV that diesel inventories had become “unacceptably low” and “all options are on the table” to build supplies and reduce retail prices. The outlet later noted that there are at least two tanker ships carrying around 1 million barrels of diesel that have been redirected from Europe to New York, suggesting they may offer America some relief going into November. Delta Air Line’s Trainer refinery in Pennsylvania is also wrapping up its seasonal maintenance, meaning more regional production. 


But it’s still a bad situation and one that cannot be remedied overnight. Expect high energy prices through the rest of the year (at a minimum) and for high fuel prices to influence the amount you have to pay for just about everything else.


[Image: Robert V Schwemmer/Shutterstock]

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  • Kcflyer Kcflyer on Oct 27, 2022

    Well said Matt!

  • UncleAL UncleAL on Nov 30, 2022

    "The present national average for diesel fuel is around $5.34 per gallon – up from $1.67 per gallon this time last year" is a resounding reason for "Let's Go Brandon" or the "FJB" chorus.....stupidity and incompetence goes a long way to destroy the country !

  • Jwee More range and faster charging cannot be good news for the heavily indebted and distracted Musk.Tesla China is discounting their cars. Apart from the Model 3, no one is much buying Tesla's here in Europe. Other groups have already passed Tesla in Europe, where it was once dominant.Among manufacturers, 2021 EV sales:VW Group 25%, Stellantis at 14.5%,Tesla at 13.9%Hyundai-Kia at 11.2% Renault Group at 10.3%. Just 2 years ago, Tesla had a commanding 31.1% share of the European EV marketOuch. https://carsalesbase.com/european-sales-2021-ev/@lou_BC, carsalebase.com changed their data, so this is slightly different than last time I posted this, but same idea.
  • Varezhka Given how long the Mitsubishi USA has been in red, that's a hard one. I mean, this company has been losing money in all regions *except* SE Asia and Oceania ever since they lost the commercial division to Daimler.I think the only reason we still have the brand is A) Mitsubishi conglomerate's pride won't allow it B) US still a source of large volume for the company, even if they lose money on each one and C) it cost too much money to pull out and no one wants to take responsibility. If I was the head of Mitsubishi's North American operation and retreat was not an option, I think my best bet would be to reduce overhead by replacing all the cars with rebadged Nissans built in Tennessee and Mexico.As much as I'd like to see the return of Triton, Pajero Sport (Montero Sport to you and me), and Delica I'm sure that's more nostalgia and grass is greener thing than anything else.
  • Varezhka If there's one (small) downside to the dealer not being allowed to sell above MSRP, it's that now we get a lot of people signing up for the car with zero intention of keeping the car they bought. We end up with a lot of "lightly used" examples on sale for a huge mark-up, including those self-purchased by the dealerships themselves. I'm sure this is what we'll end up seeing with GR Corolla in Japan as well.This is also why the Land Cruiser has a 4 year waitlist in Japan (36K USD starting MSRP -> buy and immediately flip for 10, 20K more -> profit) I'm not sure if there's a good solution for this apart from setting the MSRP higher to match what the market allows, though this lottery system is probably as close as we can get.
  • Jeff S @Lou_BC--Unrelated to this article but of interest I found this on You Tube which explains why certain vehicles are not available in the US because of how the CAFE measures fuel standards. I remember you commenting on this a few years ago on another article on TTAC. The 2023 Chevrolet Montana is an adorable small truck that's never coming to the USA. It's not because of the 1.2L engine, or that Americans aren't interested in small trucks, it's that fuel economy legislation effectively prevents small trucks from happening. What about the Maverick? It's not as small as you think. CAFE, or Corporate Average Fuel Economy is the real reason trucks in America are all at least a specific dimension. Here's how it works and why it means no tiny trucks for us. https://www.youtube.com/watch?v=-eoMrwrGA8A&ab_channel=AlexonAutos
  • Gabe A new retro-styled Montero as their halo vehicle to compete against the Bronco, Wrangler and 4Runner. Boxy, round headlights like the 1st generation, two door and four door models, body on frame.A compact, urban truck, Mighty Max, to compete against the Maverick. Retro-styled like the early 90s Mighty Max.A new Outlander Sport as more of a wagon/crossover to compete against the Crosstrek and Kona. Needs to have more power (190+ HP) and a legit transmission, no CVT.A new Eclipse hybrid to compete against the upcoming redesigned Prius. Just match the Prius's specs and make it look great.Drop the Eclipse Cross, I am not sure why they wanted to resurrect the Pontiac Aztec. Keep the Mirage and keep it cheap, make the styling better and up the wheel size. The Outlander seems fine.I like the idea of some sort of commercial vehicle, something similar in size to the Promaster City but with AWD.
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