The inflation situation might get worse due to low diesel crisis
Prices for November deliveries of diesel have already increased by 38%.
Due to historically low stock levels of the fuel, which is utilized for heating and road transportation, the United States is currently experiencing one of the greatest diesel shortages in decades.
Data made public by the government last week revealed that the nation's fuel reserves are at their lowest level since 1993, at only 25 days. According to the Ministry of Energy, diesel stockpiles in the northeast of the nation, where residents rely on it the most during the winter, are one-third lower than normal.
Due to the fact that customers are already dealing with the biggest inflation in a generation, this will certainly result in severe price rises that will be passed on to consumers.
According to Andy Lipow, president of Lipow Oil Associates, LLC, the cost of diesel fuel increased by 38% in November, which is expected to result in a price increase for heating oil, particularly in the Northeast.
Due to an increased reliance on trucks, agricultural, and heating oil, prices are anticipated to increase more in the upcoming months, even if weekly demand is at its highest level in two years.
According to Lipow, the national average price of diesel fuel, which is now $5.30 a gallon, is likely to rise by 15 to 20 cents in the upcoming weeks.
Retail prices will also increase; according to AAA, the average gallon of diesel now costs $5.31, a 9 percent increase from one month ago and a 50 percent increase from one year ago.
A perfect series of events has led to the shortage: In addition to the COVID-19 epidemic delaying the development of additional refining capacity, the majority of facilities were shut down, according to Lipow. The issue was made worse by a week-long strike at a French refinery last month, and analysts predict that this year's EU restriction on buying Russian oil and diesel will have a further negative impact on supply.
Additionally, Lipov claimed that the phenomena of market assurances, in which prices are greater now than they will be later, has turned the storage industry into a "crazy business."
All of this is taking place as global inventories are decreasing, he continued. "The outcome is a sharp rise in oil prices."
While Americans are already anxious about the status of the economy and excruciatingly high inflation, the Biden administration is worried about energy shortages ahead of the November elections.
The National Economic Council's head, Brian Deese, told Bloomberg last week that the stock market is "unacceptably low" and that there is "every possibility" to boost supply and drive down retail prices.
Energy providers caution that the situation with diesel is changing quickly.
After U.S. diesel supplies dipped below a 25-day supply, Mansfield Energy issued a warning about fuel shortages in the Southeast. The business could not specifically state why, but did point out that for the majority of the year, diesel stockpiles had been lower than before.
In certain southeastern U.S. regions, there are shortages of diesel due to "poor economic circumstances for pipeline transportation and historically low fuel stockpiles," according to the business. These events have been intermittent, with Tennessee seeing particularly bad issues.
Mansfield Energy claims there are issues in several U.S. states, despite the fact that fuel and energy shortages are now a worldwide concern. Diesel stockpiles in the Northeast are at their lowest point since the majority of 2022. The citizens of Maryland, Virginia, Georgia, Tennessee, North Carolina, South Carolina, and Alabama may have issues as a result of part of this pressure, which is shifting.
Mansfield moved to Alert Level 4 to handle market volatility because conditions were changing quickly and the market was changing dramatically every day, according to a statement from Mansfield.
Mansfield is also implementing a Code Red in the Southeast, requiring supplies to be made with at least 72 hours' notice in order to maintain reasonable levels of gasoline and commodities stockpiles.
Whether you are worried or not, the energy sector is now experiencing excellent economic conditions. The profit margin for diesel manufacturing is unparalleled, despite the fact that diesel stockpiles are at their lowest point since 2008.
According to statements made by the White House, efforts would be made to preserve and grow diesel stockpiles. But prior initiatives have failed, and the United States has continued to export more fuel than usual. President Biden received a response when he requested that the Organization of Petroleum Exporting Countries (OPEC) raise output.
Ironically, this allowed the administration to try to increase domestic energy production as part of its overall energy strategy by tapping reserves (sometimes just to sell them), which is ironic given that the administration must also acknowledge its general desire to see the nation permanently abandon fossil fuels. Unfortunately, reality is more significant than any idealized future that politicians would like to envision. Today's energy sources are depleting, and as for diesel, we have less than a month left.
After Biden's visit to Saudi Arabia in July, the Saudi energy minister brought up the subject in public, alleging that the White House was consciously attempting to control the price of oil by using these stocks.
Even if their intention was to ease supply issues, he claimed that people were manipulating the market by utilizing their emergency stocks as a tool. "In the upcoming months, the loss of emergency reserves can be unpleasant. Oil stockpiles shouldn't be used by nations to influence oil prices."
It is obvious that there is now considerable animosity between Saudi Arabia and the United States. That does not, however, mean that the aforementioned assertion is false. To reduce petroleum costs (and boost supply) globally, OPEC might have raised output. However, they appear to have realized, like Western oil companies, that there is a lot of money to be gained when people are in need.
However, the state of affairs appears to be deteriorating at such a rate that businesses may find it challenging to survive, particularly now that the cold months are beginning to arrive in much of the world (where heating is crucial) and common people are protesting against energy companies and their own governments more frequently.
You may place the blame for the situation we are in on a variety of things, including the conflict between Russia and Ukraine, OPEC, Western energy businesses, or general government inefficiency. Let's hope there is a solution and that we can survive the winter on the remaining fuel.