As we head into the summer season, a new crisis looms on the horizon related to the nation’s supply chain.
Diesel fuel, which powers many essential supply vehicles (e.g., trucks, boats, and trains) and farm equipment, is in short supply.
According to the American Automobile Association (AAA), a gallon of diesel is $5.554, up 75 percent from a year ago. This is just short of the record high of $5.58 that was posted last week. Prices are even higher in the northeast. In New York, the average price of diesel is $6.515. In Rhode Island, it is $6.43.East coast diesel inventories have plunged to their lowest levels in more than 30 years. Nationally, stockpiles are at a 17-year low.This could prove devastating for the post-pandemic recovery since it is a crucial component of the economy as it fuels everything from farming machinery to construction equipment to cargo ships
The East Coast of the U.S. is reporting its lowest seasonal diesel inventory on record. Part of the looming shortage is the closure of refineries for diesel fuel.
The reason for so many closures? Regulations, of course.
In the past 15 years, the number of refineries on the U.S. East Coast has halved to just seven. The closures have reduced the region’s oil processing capacity to just 818,000 barrels per day, down from 1.64 million barrels per day in 2009. Regional oil demand, however, is stronger.Rory Johnston, a managing director at Toronto-based research firm Price Street and writer of the newsletter Commodity Context, told FreightWaves that refining is a “thankless industry,” with intense regulations that have limited the opening of new refineries. The Great Recession of 2008 led to several East Coast refineries shuttering, but there have been more recent shutdowns too. One major Philadelphia refinery shuttered in 2019 after a giant fire (and it already had declared bankruptcy), and another refinery in Newfoundland shut down in 2020.
Daryl Dozar, who has been a truck driver for 15 years, explains the realities of the shortage.
“A company got a variety of trucks, so they have a bigger budget. An owner-op everything, insurance, fuel, anything you do with your truck you gotta pay out of pocket, so it’s really hard on an owner-op, it really is,” said Dozar.The truckers feel prices and a potential fuel shortage will not only impact them, but the general public as well.
Meanwhile, the Biden administration is scrambling to put a band-aid on the problem. Instead of putting a leash on green justice bureaucrats, it plans to renew Chevron’s license to operate in the economic hellscape of Venezuela.
The last U.S. energy producer in Venezuela asked President Joe Biden’s government in March for a license that would allow it a greater say in its joint ventures with Venezuela’s state-run PDVSA, a first step to reviving output and controlling where oil is sent.In a reversal of earlier hopes for a broadly expanded authorization, however, the license now is expected to be renewed as-is or returned to some of the terms it had in 2020, which did not limit Chevron’s drilling, processing or shipping oil from Venezuela, according to the people. A final decision has not yet been made, one person familiar with the matter said.Washington last week gave Chevron what it called a “narrow” authorization through November to engage in talks with President Nicolas Maduro’s government on future activities.
Next, the Biden administration is considering a release of diesel fuel from federal reserves.
Officials have drafted an emergency declaration as prices have soared to record highs in recent weeks, White House spokeswoman Emilie Simons said on Twitter on Monday. Such a declaration would allow for the quick release of some of the 1 million barrels of diesel in the Northeast Home Heating Oil Reserve “if necessary,” she said.“We’re closely monitoring challenges to diesel supply and prices as a result of Putin’s invasion,” she said, referring to the Russian war in Ukraine that has roiled global energy markets. “This would bridge short-term supply shortfalls.”
You may be wondering how Department of Transportation Secretary Pete Buttigieg is trying to address this problem. The usual way: By heading out of town for an elite conference at a beautiful location to give a speech.
U.S. Transportation Secretary Pete Buttigieg will attend the Mackinac Policy Conference on Mackinac Island next week, Gov. Gretchen Whitmer’s office announced Wednesday.Buttigieg will give a keynote address June 1 at the annual political confab and hold a press conference with Whitmer later that day.“Michigan is a great place to talk transportation — it’s home to many of the world’s great car manufacturers and a governor who has been a nation-leader on ‘fixing the damn roads,’” said Buttigieg said in a statement, referencing one of Whitmer’s 2018 campaign refrains.
I suspect the Biden administration’s approach to the upcoming diesel fuel shortage will simply be the next in a continuing catalog of failure.
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