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October 31, 2022

Diesel shortage update!

Hank Newman, CEO/Founder

Hank Newman, CEO/Founder

The hot topic being kicked around right now is, “Why is there a diesel shortage, and how will this impact us?”

Here’s a short summary starting with a quick caption from a Forbes article of Oct 30, 2022:

“Last week, the Energy Information Administration (EIA) reported that distillate inventories were at their lowest levels since 2008. (The primary distillates are diesel, jet fuel, and heating oil).

“However, in 2008 distillate levels were low coming out of spring. Currently, they are low going into fall. That’s far worse than the situation in 2008.”

According to Forbes, there are 4 primary drivers of the diesel fuel supply right now:

  • Distillate demand spikes in the spring and in the fall (farmers and winter heating)
  • Refineries typically schedule maintenance around now
  • Refinery capacity has fallen (clearly a result of climate policy and language)
  • PRIMARY REASON NOW — The cutoff of Russian imports.

I’m sure we can discuss ad nauseam the political climate around our rapid movement towards electrification and away from fossil fuels, but regardless of your views, this is the reality we are seeing right now and I don’t think anyone should be surprised at that.

So how will this impact you? I think this is pretty easy:

  • Prices will escalate as the FSC portion of freight costs will go up.
  • Capacity will tighten as smaller carriers may shut down. They simply cannot recoup fuel costs the way larger carriers can.

Enjoy!

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