Post by the Scribe on Nov 2, 2022 8:55:18 GMT
No, We Aren’t Running Out of Diesel — But Low Stockpiles Mean Higher Prices
www.truckinginfo.com/10186010/no-we-arent-running-out-of-diesel-but-low-stockpiles-mean-higher-prices
November 1, 2022 • By Deborah Lockridge •
Distillate stocks are low, but the "days supply" number is being misunderstood. - Source: U.S. Energy Information Administration
Distillate stocks are low, but the "days supply" number is being misunderstood.
Source: U.S. Energy Information Administration
While stockpiles of distillate fuels (diesel and heating oil) are low, the country is not going to suddenly run out of diesel fuel by Thanksgiving, despite reports of a “diesel shortage” driven by widespread misunderstanding of a government statistic.
However, what those low stocks do mean is higher diesel prices, especially in the Northeast where stocks are the lowest and diesel faces competition from fuel oil. On a normal day, the East Coast markets have 50 million barrels in storage, but right now, there are less than 25 million barrels available.
U.S. Energy Information Administration (EIA) data for the week ending Oct. 21 showed the U.S. has 25.9 days’ worth of supply of diesel fuel. But that would only happen if U.S. refineries stopped producing distillates completely and we stopped all imports from other countries. It’s calculated by taking U.S. inventory and dividing it by daily demand.
Patrick De Haan, @gasbuddyguy, explains that this number is a measurement of supply and demand, and that it’s “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 slowly rise... but again, this number DOES NOT MEAN outages are imminent.”
Looking specifically at the ultra-low-sulfur diesel used in on-highway trucks and buses, stocks have been around 95 million gallons for the weeks ending Oct. 14 and Oct. 21, according to the Energy Information Administration, down from 106.6 million in mid-September. The last time it was in this territory was late April/early May of this year — but before 2022, we have to go back to November 2014 to see ULSD stocks dip below 100,000.
www.eia.gov/dnav/pet/pet_stoc_wstk_a_EPDXL0_sae_mbbl_w.htm
Shrinking Diesel Supply
There are several factors at play in the low distillate stocks:
Fall is a time when refineries typically do maintenance. Tom Kloza with the Oil Price Information Service told CNBC, “October had the most refinery maintenance in the United States probably in a number of years.”
U.S. refinery capacity has fallen in the past few years as some unprofitable refineries were closed.
The cutoff of Russian oil imports. According to Forbes, before Russia’s invasion of Ukraine, the U.S. was importing nearly 700,000 barrels per day of petroleum and petroleum products. “Most of those imports were finished products and refinery inputs that boosted distillate supplies in the U.S.”
“Refineries do have a small amount of flexibility in shifting gasoline production to diesel production,” wrote Forbes' Robert Rapier. “But it’s a relatively small amount.”
www.forbes.com/sites/rrapier/2022/10/30/why-the-us-has-a-diesel-shortage/?sh=c05c0eb4064f
Some ocean tankers carrying diesel to Europe have been re-routed to the U.S., reported Reuters.
www.reuters.com/business/energy/traders-divert-europe-bound-diesel-us-race-re-stock-2022-10-14/
Stocks of ultra-low-sulfur diesel. - Source: U.S. Energy Information Administration
Stocks of ultra-low-sulfur diesel.
Source: U.S. Energy Information Administration
Higher Distillate Demand
At the same time, there’s increased demand for diesel, as a Mississippi River drought is forcing barge freight onto trucks and a possible rail strike looms.
And in the Northeast, as we head into winter, the demand for heating oil is a factor.
In its Oct. 12 Short-Term Energy Outlook, the EIA forecast that average household expenditures for home heating fuels will increase this winter because of both higher expected fuel costs and higher energy consumption due to colder temperatures. Compared with last winter, it predicts heating oil prices will rise by 27% from October–March.
Tom Kloza of the Oil Price Information Service told CNBC, “I think the fact that we’ve got this warning signal at the end of October and beginning of November helps. There’s tremendous profit motive out there to get refineries back up and running.”
www.cnbc.com/video/2022/10/31/opis-tom-kloza-breaks-down-the-diesel-supply-shortage.html
With that motive, Kloza said the situation could improve in November.
“Once you get to December and January, there’s really no difference between the molecules in heating oil and diesel and then you might be sending a bunch of diesel to be burned up in the chimneys of homeowners in New England.”
Low distillate stockpiles and higher demand mean higher diesel prices. - Source: U.S. Energy Information Administration
Low distillate stockpiles and higher demand mean higher diesel prices.
Source: U.S. Energy Information Administration
Higher Diesel Prices
All this means that the high diesel prices we’re seeing aren’t likely to go away anytime soon.
Diesel prices are averaging more than $1.50 higher than gasoline at the pump and many expect the price of diesel to go higher.
As of the EIA’s Oct. 31 report, gasoline prices averaged $3.742 per gallon nationally, 35 cents higher than a year ago. But the national average for a gallon of diesel was $5.317, $1.59 higher than a year ago.
Both dropped a few cents from the previous week.
More insight from Mike Antich with sister fleet brand Automotive Fleet:
Low Diesel Inventories Trigger Record Prices and Inflationary Pressures
Automotive Fleet
1.64K subscribers
160 views Oct 24, 2022
The 118th State of the Fleet Industry video produced by Automotive Fleet offers insights into the state of the fleet market as presented by AF Editor Mike Antich.
🎙Today's topics include:
- On average, diesel stockpiles today are 30% lower than what they have traditionally been at this time of year. As of Oct. 21, diesel supply in the U.S. is down to 25 days, which means diesel inventories are at their lowest level for this time of year since 2008.
- There is a direct correlation between the low inventory of diesel and the price at retail pumps. This low supply is exerting upward pressure on the price of diesel, especially since there is an ongoing strong demand for the product.
- When diesel stockpiles contracted in April and May 2022, it created upward pressure on retail prices. In May 2022, No. 2 diesel hit an all-time record retail price of $5.51 per gallon.
- The higher cost of diesel creates inflationary pricing pressures. For instance, when the cost to transport goods increases, those increased costs are passed on to end-users.
- What will ultimately bring down the price of diesel and increase the inventory of diesel fuel will be the recession that everyone is predicting. A recession would slowdown in end-user demand and industrial activity, which, in turn, will put downward pressure on fuel consumption.
📰 Make sure you're signed up for the AF enewsletter so you don't miss another State of the Fleet Industry video ➡ bob.dragonforms.com/loading.d...
Fuel Prices Overtake Driver Shortage as Most Critical Industry Issue
www.truckinginfo.com/10184572/fuel-prices-overtake-driver-shortage-as-most-critical-industry-issue
www.truckinginfo.com/10186010/no-we-arent-running-out-of-diesel-but-low-stockpiles-mean-higher-prices
November 1, 2022 • By Deborah Lockridge •
Distillate stocks are low, but the "days supply" number is being misunderstood. - Source: U.S. Energy Information Administration
Distillate stocks are low, but the "days supply" number is being misunderstood.
Source: U.S. Energy Information Administration
While stockpiles of distillate fuels (diesel and heating oil) are low, the country is not going to suddenly run out of diesel fuel by Thanksgiving, despite reports of a “diesel shortage” driven by widespread misunderstanding of a government statistic.
However, what those low stocks do mean is higher diesel prices, especially in the Northeast where stocks are the lowest and diesel faces competition from fuel oil. On a normal day, the East Coast markets have 50 million barrels in storage, but right now, there are less than 25 million barrels available.
U.S. Energy Information Administration (EIA) data for the week ending Oct. 21 showed the U.S. has 25.9 days’ worth of supply of diesel fuel. But that would only happen if U.S. refineries stopped producing distillates completely and we stopped all imports from other countries. It’s calculated by taking U.S. inventory and dividing it by daily demand.
Patrick De Haan, @gasbuddyguy, explains that this number is a measurement of supply and demand, and that it’s “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 slowly rise... but again, this number DOES NOT MEAN outages are imminent.”
Looking specifically at the ultra-low-sulfur diesel used in on-highway trucks and buses, stocks have been around 95 million gallons for the weeks ending Oct. 14 and Oct. 21, according to the Energy Information Administration, down from 106.6 million in mid-September. The last time it was in this territory was late April/early May of this year — but before 2022, we have to go back to November 2014 to see ULSD stocks dip below 100,000.
www.eia.gov/dnav/pet/pet_stoc_wstk_a_EPDXL0_sae_mbbl_w.htm
Shrinking Diesel Supply
There are several factors at play in the low distillate stocks:
Fall is a time when refineries typically do maintenance. Tom Kloza with the Oil Price Information Service told CNBC, “October had the most refinery maintenance in the United States probably in a number of years.”
U.S. refinery capacity has fallen in the past few years as some unprofitable refineries were closed.
The cutoff of Russian oil imports. According to Forbes, before Russia’s invasion of Ukraine, the U.S. was importing nearly 700,000 barrels per day of petroleum and petroleum products. “Most of those imports were finished products and refinery inputs that boosted distillate supplies in the U.S.”
“Refineries do have a small amount of flexibility in shifting gasoline production to diesel production,” wrote Forbes' Robert Rapier. “But it’s a relatively small amount.”
www.forbes.com/sites/rrapier/2022/10/30/why-the-us-has-a-diesel-shortage/?sh=c05c0eb4064f
Some ocean tankers carrying diesel to Europe have been re-routed to the U.S., reported Reuters.
www.reuters.com/business/energy/traders-divert-europe-bound-diesel-us-race-re-stock-2022-10-14/
Stocks of ultra-low-sulfur diesel. - Source: U.S. Energy Information Administration
Stocks of ultra-low-sulfur diesel.
Source: U.S. Energy Information Administration
Higher Distillate Demand
At the same time, there’s increased demand for diesel, as a Mississippi River drought is forcing barge freight onto trucks and a possible rail strike looms.
And in the Northeast, as we head into winter, the demand for heating oil is a factor.
In its Oct. 12 Short-Term Energy Outlook, the EIA forecast that average household expenditures for home heating fuels will increase this winter because of both higher expected fuel costs and higher energy consumption due to colder temperatures. Compared with last winter, it predicts heating oil prices will rise by 27% from October–March.
Tom Kloza of the Oil Price Information Service told CNBC, “I think the fact that we’ve got this warning signal at the end of October and beginning of November helps. There’s tremendous profit motive out there to get refineries back up and running.”
www.cnbc.com/video/2022/10/31/opis-tom-kloza-breaks-down-the-diesel-supply-shortage.html
With that motive, Kloza said the situation could improve in November.
“Once you get to December and January, there’s really no difference between the molecules in heating oil and diesel and then you might be sending a bunch of diesel to be burned up in the chimneys of homeowners in New England.”
Low distillate stockpiles and higher demand mean higher diesel prices. - Source: U.S. Energy Information Administration
Low distillate stockpiles and higher demand mean higher diesel prices.
Source: U.S. Energy Information Administration
Higher Diesel Prices
All this means that the high diesel prices we’re seeing aren’t likely to go away anytime soon.
Diesel prices are averaging more than $1.50 higher than gasoline at the pump and many expect the price of diesel to go higher.
As of the EIA’s Oct. 31 report, gasoline prices averaged $3.742 per gallon nationally, 35 cents higher than a year ago. But the national average for a gallon of diesel was $5.317, $1.59 higher than a year ago.
Both dropped a few cents from the previous week.
More insight from Mike Antich with sister fleet brand Automotive Fleet:
Low Diesel Inventories Trigger Record Prices and Inflationary Pressures
Automotive Fleet
1.64K subscribers
160 views Oct 24, 2022
The 118th State of the Fleet Industry video produced by Automotive Fleet offers insights into the state of the fleet market as presented by AF Editor Mike Antich.
🎙Today's topics include:
- On average, diesel stockpiles today are 30% lower than what they have traditionally been at this time of year. As of Oct. 21, diesel supply in the U.S. is down to 25 days, which means diesel inventories are at their lowest level for this time of year since 2008.
- There is a direct correlation between the low inventory of diesel and the price at retail pumps. This low supply is exerting upward pressure on the price of diesel, especially since there is an ongoing strong demand for the product.
- When diesel stockpiles contracted in April and May 2022, it created upward pressure on retail prices. In May 2022, No. 2 diesel hit an all-time record retail price of $5.51 per gallon.
- The higher cost of diesel creates inflationary pricing pressures. For instance, when the cost to transport goods increases, those increased costs are passed on to end-users.
- What will ultimately bring down the price of diesel and increase the inventory of diesel fuel will be the recession that everyone is predicting. A recession would slowdown in end-user demand and industrial activity, which, in turn, will put downward pressure on fuel consumption.
📰 Make sure you're signed up for the AF enewsletter so you don't miss another State of the Fleet Industry video ➡ bob.dragonforms.com/loading.d...
Fuel Prices Overtake Driver Shortage as Most Critical Industry Issue
www.truckinginfo.com/10184572/fuel-prices-overtake-driver-shortage-as-most-critical-industry-issue