The supply of diesel fuel has become uncomfortably tight this fall, drumming up concerns about future availability.
The U.S. started the month with about a 25-day supply of diesel in storage.
But that doesn’t mean the tanks will run dry in that amount of time, according to Tim Abel, GROWMARK refined fuels, supply and trading manager.
“We do have tight supplies,” Abel told the RFD Radio Network. “This time of year, maybe 32 days supply or 34 days supply would be more applicable.
“But I think it (the 25-day supply) has been overplayed in the media,” he said. “We’re not going to run out (of diesel) in 25 days. It just means we’re extremely low — it’s just another metric for measuring what we have.”
The amount of diesel measured as “days of supply” factors the current demand divided into the availability of inventory, according to Abel.
The situation certainly continues to pressure prices, though.
Average diesel prices started the month at $5.31 per gallon nationwide, up $1.59 compared to last year, and $5.32 in the Midwest, $1.68 higher than last year.
“From a U.S. and world perspective, heating oil, diesel fuel and jet fuel supplies have been extremely tight,” Abel said. “A lot of dynamics have gotten us to where we are today.”
The refined fuels expert traces the start of the rise in diesel prices back to 2019 when the International Maritime Organization implemented lower sulfur content standards for its fuel. That was followed by demand destruction from the COVID pandemic in 2020-21 followed by the industry trying to adjust to a rebound in fuel demand this year amid the ongoing war in Ukraine.
“The EU is trying to wean itself off Russian fuel,” Abel said. “When you look at the different supply disruptions, that’s why we’re at where we are today.”
During recent years, some refining capacity was taken offline amid the chaos and market uncertainty. And some companies are now unsure how much to invest in production with mixed signals about the future use of carbon-based fuels.
“Global refining capacity is down 3 million barrels per day from where we were in 2019 and here in the U.S. it’s down about 1 million barrels,” Abel said. “Overall, the view on carbon-based fuel has changed. As companies look how to spend money, we’ve seen a retraction of carbon-based fuel.”
Meanwhile, fuel supplies for ag purposes typically tighten this time of year following peak harvest activity. The question this year is how quickly will fuel storage tanks be replenished.
“It’s not unusual for the (diesel) supply to be tight in the fall. We go through peaks and valleys,” Abel said. “It’s also normal to a see a rebuild in the non-peak season.”
The rebuild process could be slowed in the weeks ahead, though. With diesel prices still at historic highs, many mid-sized fuel suppliers may opt to keep a “just-in-time” inventory on hand in anticipation of lower prices this winter, according to Abel.
This story was distributed through a cooperative project between Illinois Farm Bureau and the Illinois Press Association. For more food and farming news, visit FarmWeekNow.com.