A Reuters® market analyst says a projected increase in U.S. manufacturing could trigger a diesel shortage this year. The analyst, John Kemp, says that manufacturing market indicators point to a return-to-normal increase in industrial production. He says the slowing in U.S. manufacturing is unusual, and has lasted for much longer than a “normal” slowdown, but thinks it’s about over. When that happens, a sort of “perfect storm” could lead to diesel shortages—and higher prices, of course.
Diesel shortage perfect storm
How are industrial manufacturing and diesel demand related? The two are “closely correlated,” says Kemp, not only with manufacturing having a demand, but with the shipping out of completed products. The amount of petroleum distillates going out to the market has been flat, or even down, since it last peaked in mid-2022. Consumption has been down about 100,000 barrels per day, about 3% off from the peak. If biodiesel and renewable diesel figures are factored in, then actual demand would appear basically flat.
But when U.S. manufacturing gets off the dime and starts producing more, which Kemp says “seems very likely,” then diesel consumption will head up. He sees this as happening in the first half of this year. But here’s where the “perfect storm” rolls in. On January 26, distillate inventories stood at 131 million barrels. That “stockpile,” if you will, is 10 million barrels, or 7% less than the 10-year prior seasonal average. If manufacturing takes off, those skinny fuel inventories will get sucked up “and fuel prices will start to escalate relatively quickly,” says analyst Kemp. Instant diesel shortage, instant price increase.
If Kemp’s petroleum prognostications are true, a diesel shortage would decidedly spell bad news for summer and possibly even spring travel. So, if you’re putting your travel budget together now, you might pad fuel expenses a bit, just in case. There might just be a diesel shortage.
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Thank you, Russ and Tina! Interesting. I wonder what other forecasters are saying? If I learn anything, then I’ll reply to this comment (probably will learn nothing, we’ll see). Safe travels! 🙂
Looks like the U.S. Energy Information Administration’s February 6, 2024 update to the “Short-Term Energy Forecast” (https://www.eia.gov/outlooks/steo/, second of the four rotating figures on the landing page) forecasts retail diesel prices pretty flat over 2024 at $4.00/gallon. So, maybe a spike, maybe not so much. We’ll see. They are only forecasts, as in an educated guess, after all. 🙂
Thank you, Diane! Boy! You’re fast! 🙂 Good night! 🙂
Just depends on if I’m paying attention or not (i.e., how focused I am on proofing a post, etc.). Sometimes it takes longer to see that something is being held for approval, especially if I don’t click to update a page I’m working on. It doesn’t update the comments status otherwise. But I’ll see it eventually.😉 Have a good evening/night, Neal. 😀 –Diane
I have a 2500 gallon diesel tank in my commercial yard and my bulk diesel distributor said he feels like it will be flat this year, but I have seen my material manufacturing base forecast up 13% for 2024. It’s anybody’s guess, I guess, but I’m going with it staying flat, for now.
You’re exactly right, Cancelproof. The longer you’ve been in your business using large volumes of diesel, the more experienced you are, and the better your estimates are and easily can be better than EIA’s or Reuters.
I sure miss the $2.50 per gallon diesel we had in December 2020.
Solution… Get everyone to stop driving so much. People stayed home more during the pandemic and low demand drove down prices.
Agree with the supply and demand concept but I’m pretty sure that wasn’t the only reason.
True that. However, I also miss the low prices of 2019….. any causation to correlate for that year? Anyone?
Your income went up.
Investment income for sure.
Yup.
It sure did. Payroll went up, materials went up, overhead went up and thus, prices went up to maintain exactly the same profit %. You didn’t think I would just charge customers the same as 2019 and simply eat the inflation increases, did you? The higher costs go the higher profit goes.
If prices go back up to previous highs we will just park the coach.