US diesel shortage worsens
US diesel shortages are spreading along the East Coast amid a ban on imports from Russia, raising fears of further surges in prices for the fuel as consumers brace for the winter heating season.
Mansfield Energy, one of the nation’s major fuel distributors, instituted emergency measures on Tuesday and warned its customers that carriers were being forced to visit multiple terminals in some cases to find supplies, delaying deliveries. With shortages spreading from the Northeast to the Southeast, the company advised customers to give 72-hour notice for their orders to avoid having to pay above-market prices.
“In many areas, actual fuel prices are currently 30-80 cents higher than the posted market average because supply is tight,” said Mansfield, which delivers over three billion gallons of oil products annually. With the relatively low-cost suppliers running out of diesel, distributors are forced to draw from higher-cost sources, resulting in unusually wide spreads in pricing.
Mansfield’s advisory came just six days after US National Economic Council director Brian Deese told Bloomberg News that diesel supplies were “unacceptably low” and that President Joe Biden’s administration had “all options” on the table to reduce prices. However, as Bloomberg and other media outlets have noted, it’s not clear how those options would provide long-term relief.
Diesel supplies in New England, the US region most reliant on distillate fuels for heating, have reportedly dwindled to about one-third of normal levels for this time of year. Nationwide, the US has only 25 days’ worth of diesel supplies, the lowest level since 2008.
Deese told Bloomberg that the US could tap its Northeast Home Heating Oil Reserve, which holds one million barrels of diesel for emergency use. But, as the Washington Post noted, demand for the fuel is so high in the Northeast that those reserves would be depleted in fewer than six hours. The White House has also considered banning or restricting exports of refined fuels – a strategy that industry trade groups claimed would backfire.
“Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate US allies during a time of war,” the American Petroleum Institute and the American Fuel and Petrochemical Manufacturers said earlier this month in a letter to US Secretary of Energy Jennifer Granholm.
The shortages also put the US at risk of further spikes in prices if there’s a supply disruption, such as a refinery breakdown. Higher prices for the fuel would ripple through the US economy because 18-wheelers and other diesel-powered vehicles carry about 70% of the nation’s freight tonnage.
Diesel prices are currently averaging nearly $5.32 per gallon nationwide, down 8.6% from the all-time high set in June, according to the AAA auto club. By comparison, the average gasoline price has dropped 25% from its record high to $3.76 per gallon. Diesel prices are up 47% from a year ago.