It's not the President that I'm thinking about.
From Bloomberg, October 18:
American stockpiles of distillate fuel are exceptionally low, which could mean higher costs for everything from trucking to farming to construction.
What do Joe Biden and Harry S. Truman have in common? Both presidents ran the US when American stockpiles of distillate fuel were exceptionally low. Currently, the US has just 106 million barrels of diesel and heating oil in commercial stocks; the last time inventories were that low in mid-October was in 1951, when Truman was in the White House. Typically, inventories should be 30% higher this time of the year.
Such low levels are alarming because diesel is the workhorse of the global economy. It powers trucks and vans, excavators, freight trains and ships. A shortage would mean higher costs for everything from trucking to farming to construction.
The diesel crisis leaves the Biden administration facing very difficult choices. If he leaves the market alone, prices are likely to rise further before they drop; if he intervenes, either setting up minimum inventory levels or restricting exports, price increases will likely be felt elsewhere into the world. Either route will have big implications for inflation at home and for energy security in Latin America and Europe.
Wholesale diesel prices in the spot market of New York harbor, a key pricing point, have surged this week to more than $200 per barrel. Excluding a three-week period from late April into mid-May, that would be a record high. As a result, American refiners are enjoying the best-ever diesel margins, with the profit of turning a barrel of crude into one of diesel hitting a record high of $86.5 per barrel, up roughly 450% from the 2000-2020 average of $15.7 per barrel.
That’s great for refiners, but bad for everyone else depending on the fuel. Retail prices have increased nearly half-a-dollar in just two weeks. This isn’t all that surprising. The American diesel market has been in crisis mode for most of 2022, and the warning lights have been flashing for months. The reasons for the collapse in inventories and the price surge are four-fold. First, local diesel demand has recovered quicker than gasoline and jet-fuel from the impact of the pandemic, draining stocks. Second, foreign demand is also strong, with American diesel exports running at unusually high level.
Third, the US also has lower refining capacity than before, reducing its capacity to make fuels.
And then there’s Russia’s invasion of Ukraine. The US was importing a significant amount of Russian fuel oil before the war, which its Gulf of Mexico-based refiners turned into diesel. The trade ended after the White House sanctioned Russian petroleum exports.
Last spring, wholesale diesel prices surged to all-time high as inventories plunged in April and May, pushing retail prices to a record high. Now, a new crisis is in the making. America typically uses the low-demand seasons of spring and summer to rebuild its stocks of distillate fuels ahead of the winter. But it failed to do so this year, and stocks are now nearly as low as they were in April, at the end of the last heating season.....
....MUCH MORE
Earlier:
Home Heating: Europe Will Make It Through The Winter, New York, New England Begin Rationing Heating Oil
