A major U.S. diesel fuel supplier warned of a “shortage” of oil on the East Coast on Monday and suggested it could drive up prices for various consumer goods in the near term.
But while diesel and gasoline inventories are lower than they have been in the past, the limited supply of diesel fuel is not a cause for panic, and the United States is not going to run out. , according to energy market experts.
On Tuesday, headlines proliferating that the United States had just 25 days of diesel supply left. Fox News host Tucker Carlson last week tweeted that “this country is about to run out of diesel fuel”.
The current limited supply, however, does not mean that the United States will run out of diesel – used to power trucks and heating systems – during this period.
“Diesel and gasoline stocks are below five-year averages, and if the whole world shut down we would have 25 days worth of diesel. But the world is not shutting down. stops,” Ed Hirs, a professor of energy economics at the University of Houston, told CBS MoneyWatch.
He likened the situation to a grocery store’s milk supply at any given time.
“Your grocery store may have three days’ worth of milk. That’s because they only have three days’ worth of milk at any given time. But the cow keeps milking, the farmer keeps sending milk, the dairy continues to deliver,” Hirs said.
Refine capacity under power
That said, a number of factors are currently weighing on domestic diesel fuel supply. The smaller than usual supply stems from events that took place already 2019 ago.
Russia’s war against Ukrainerefinery closures due to COVID-19 and Hurricane Ida and the explosion of a fire at a Philadelphia refinery in 2019 all contributed to reducing refining capacity by about 1 million barrels per day, according to energy expert Patrick De Haan of GasBuddy. .
“Because the nation is dealing with less refining capacity than at the start of 2019, and at the same time as the reopening of the economy has moved from zero to 100 miles per hour, there has been a relaxation in demand. pent up and the system is now under strain,” he told CBS MoneyWatch. “As demand begins to slow, I expect modest improvements across the board, not necessarily [in the] next weeks.”
Europe also stopped buying oil from Russia following its attack on Ukraine, increasing competition for diesel fuel in the northeast.
“Europe is looking to places other than Russia to buy fuel and they are competing with the North East for a finite amount of diesel,” De Haan said.
However, none of this means that the United States will run out of diesel.
“It’s not real,” said Hirs, the economics professor, referring to rumors that the United States could soon run out of diesel.
In terms of available supply, the United States is down about 15% from last year and 31% from two years ago, according to Hirs’ calculation.
“Now we have 25 days of supply when we would normally have around 35 to 40,” he said.
The only way to have a diesel run is for buyers to panic and start stockpiling, Hirs said, adding, “That could cause a problem.”
The price of diesel fuel remains high, at around $5.30 per gallon. “Before the holidays, it will be something that will keep the price of goods higher,” said De Haan of GasBuddy.
Higher delivery costs
While the diesel shortage won’t affect consumers at the pump, it could keep them stuck in store aisles.
If logistics and delivery services pay more for fuel, some of those increased costs will be passed on to buyers and could exacerbate inflation in the near term and throughout the holiday season.
“Consumers won’t feel it when they fill up with gas, but when they buy for the holidays, the cost of goods will be higher,” De Haan said. “It will contribute to some level of inflation.”
He noted that Amazon Prime raised the price this year an annual subscription that provides benefits such as 17% faster shipping for online orders.
“Amazon is flying more planes and paying more to do so. Rising fuel prices are built into the cost of what you pay for Prime,” he said.
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