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Rampant Food And Fuel Inflation Spells Disaster For Emerging Economies According to the World Bank's... Euphoria For Oil Companies As Earnings Exceed Expectations In what has been a... 1. Home 2. Energy 3. Energy-General Tsvetana Paraskova Tsvetana Paraskova Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. More Info Share * Facebook * Twitter * Linkedin * Reddit Premium Content The U.S. Diesel Shortage Is Worsening By Tsvetana Paraskova - Oct 31, 2022, 10:00 AM CDT * The U.S. diesel shortage is worsening as distillate inventories crash to multi-year lows. * U.S. refiners permanently shut down some refinery capacity at the start of the pandemic when fuel demand plunged. * A diesel shortage and high diesel prices don't bode well for the global economy, which could tip into recession at some point next year. Join Our Community Multi-year low inventories and constraints in supply are exacerbating a diesel shortage in the United States, especially on the East Coast. Diesel demand continues to be strong after recovering faster from the pandemic slump than other fuels such as gasoline, refiners say. But several factors have combined this year to deplete U.S. distillate inventories, which include diesel and heating oil. And ahead of the winter, the distillate fuel crunch is worsening. U.S. refining capacity is now lower than it was before Covid, as operable refinery capacity shrank in 2021 for a second consecutive year to stand at 17.9 million barrels per calendar day as of January 1, 2022, according to EIA estimates. U.S. refiners permanently shut down some refinery capacity at the start of the pandemic when fuel demand plunged, while others closed facilities to convert them into biofuel refineries. Some refineries were under maintenance this autumn, reducing the availability of products. In addition, the U.S. banned imports of all Russian energy products after the Russian invasion of Ukraine and hasn't imported any petroleum products from Russia since April Lower refinery capacity in the U.S. since the pandemic, seasonal maintenance at refineries globally, and a major strike in France have all combined in recent weeks to create a shortage of middle distillates, not only in the United States, but also worldwide. The world is also scrambling for diesel supply also in view of the looming EU embargo on Russian fuel imports by sea, expected to kick in in early February. A diesel shortage and high diesel prices don't bode well for the global economy, which is slowing down and could tip into recession at some point next year. Distillate fuels are used in transportation, agriculture, manufacturing, and heating In the U.S., distillate fuel inventories are about 20% below the five-year average for this time of year, according to the EIA's latest weekly inventory report. The U.S. has just 25 days of diesel supply in reserve, with some regional markets very tight. According to CNBC, U.S. diesel reserves at the end of October have never been so low since 1951, with the Northeast most exposed to low levels of diesel stocks. Not that refiners aren't trying--refinery utilization on the East Coast was at 102.5% in the week to October 21, per EIA data. Yet, distillate inventories are much lower than normal, and diesel and heating oil prices remain high and stoke inflation as they make consumer goods and heating bills more expensive. Households in the Northeast who rely on heating oil for space heating will see 27% higher bills this winter compared to last winter, the EIA said in its Winter Fuels Outlook in October. "Our forecast for heating oil margins this winter reflects price pressures that have currently been affecting the U.S. distillate market, including low inventories, low imports, and limited refining capacity," the EIA said. For diesel, one fuel supplier has already issued an alert for the East Coast. "East Coast fuel markets are facing diesel supply constraints due to market economics and tight inventories," Mansfield said last week. "Because conditions are rapidly devolving and market economics are changing significantly each day, Mansfield is moving to Alert Level 4 to address market volatility. Mansfield is also moving the Southeast to Code Red, requesting 72 hour notice for deliveries when possible to ensure fuel and freight can be secured at economical levels," the supplier said. The Biden Administration hasn't ruled out the idea of limiting U.S. fuel exports in order to restore inventories and lower prices. Refiners are opposed to that idea, saying that "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 U.S. allies during a time of war." Tom Kloza, Global Head of Energy Analysis at OPIS, told USA Today last week, "Between now and the end of November, if we don't build inventories, the wolf will be at the door." "And it will look like a big ugly wolf if it's a cold winter." By Tsvetana Paraskova for Oilprice.com More Top Reads From Oilprice.com: * 83% Of Americans Are Concerned About High Gasoline And Energy Prices * Consequences Or Cooperation: How Will The U.S. Deal With OPEC? * Biden Is Running U.S. Energy Security Into The Ground Download The Free Oilprice App Today Back to homepage FACEBOOK Twitter GOOGLE+ LINKEDIN REDDIT PRINT Previous Post OPEC Boosts Global Oil Demand Forecast Next Post How Record U.S. Gas Exports Could Fuel The Energy Transition Tsvetana Paraskova Tsvetana Paraskova Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 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