Diesel fuel shortage emerges across the U.S – how the system unravelled

It’s was a phenomenon many thought was confined to Europe as conflict broke out in Ukraine. But now, a major diesel fuel shortage appears to be sweeping across the United States.

The situation looks so dire, tankers already at sea and heading towards Europe have been diverted to the United States, while truckers say they’re “scavenging” for fuel.

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“I’ve never in my lifetime seen this happen and I thought all this ’25 days of diesel fuel left in America’ was a bunch on BS,” said North Carolina trucker, Brandon Hackney in a video posted to TikTok.

“Two stores right here in my little small town that ain’t got no diesel fuel, truckers are scavenging, can’t find fuel, there’s no fuel for probably 50 miles around here… It’s not looking good.”

Hundreds of other images posted across the internet in the past 48 hours have also highlighted the crippling diesel fuel shortage.

“There is an impending diesel fuel shortage in our country that could send our entire nation into a crisis. Without diesel, our economy cannot run,” tweeted Republican congressman, Jeff Duncan.

Duncan shared a chart from the Senate Ag Committee showing the United States’ diesel inventories sitting at historic lows.

diesel fuel shortage

Some part of the U.S. have labelled talk of the shortage right-wing fear mongering, despite the  U.S. Energy Information Administration show the country’s current diesel fuel supply sitting 25 days, more than halving since 2020 and well below the long term average. You can see the data we refer to here.

“There has been a wave of right-wing TV news reporting on the idea that either the U.S. will run out of diesel before Thanksgiving, or that there is a looming diesel shortage that is the sole fault of the Biden administration… The problem with this reporting is that none of the claims about the U.S. running out of diesel are true,” said Media Matters for America.

However, there is no doubt the supply situation is deteriorating.

“We only have 25 days of inventory left, the worst place we have been since 2008,” says macro analyst George Gammon.

“This time in may be worse (than 2008), because the system itself and the reasons for the decline in the inventories are much, much different than they were in 2008.”

Diesel fuel shortage down to bad Government decisions

…That’s according to Gammon.

“Lets go back to 2020 and a lot of refiners went bust – theses are the refiners that take the oil and turn it into the diesel we need to run the economy. It was the policies implemented… that led to the demand destruction that we saw.

“Now these refiners, the ones that are left, are absolutely printing money. Their margins have absolutely exploded higher as you can imagine with demand going back to where it was but all of their competitors are pretty much out of business.

And he says all the additional profit coming in recent months isn’t being invested in new capacity.

“If you owned a refinery, would you reinvest in more capacity when you have the Government breathing down your neck saying ‘we got to do something about climate change’, or in California they’re saying we’re not going to sell any gas cars, only electric cars by 2035… You got the Green New Deal, you’ve got Greta Thunberg.

“Isn’t it ironic that the prices of weeding ourselves off fossil fuels, or the attempt to do so too early, is actually what is causing the demise of the United States and the West as we know it. Everybody wants clean energy… but the problem is if we go from A to B too early there isn’t going to be an economy to benefit from the clean air. “

Gammon also says sanctions on Russia are contributing to the shortage and they “hurt us more than Russia”.

“It goes right back to the unintended – or maybe intended – consequences from the central planner’s policies.”

Signs of trouble when tankers were diverted last month

While mainstream media coverage of the diesel fuel shortage has only recently intensified, there was signs of trouble in early August.

A solitary Reuters report made mention of rare high-seas tanker diversions. Shipping monitoring services showed diesel tankers that were heading to Europe were suddenly diverted to the U.S.

Here’s what the October 14 report said.

At least two tankers carrying 90,000 tonnes of diesel and jet fuel are heading from Europe to the U.S. East Coast, according to traders and Refinitiv ship tracking data. The Thundercat, carrying a cargo of diesel from the United Arab Emirates, on Thursday changed its destination from the Dutch port of Rotterdam to the New York Harbour, according to shipping data. It is currently in the Mediterranean. Proteus Jessica, currently in the Atlantic Ocean, has in recent days changed its destination to New York from the Southwald waiting area off the southeast coast of England.

diesel fuel shortage

As the diesel fuel shortage plays out, refinery stocks shoot up

CIO of hedge fund, Glenorchy Capital, Chris Macintosh has long-held positions in U.S. oil refiners which are now becomming big beneficiaries of the current grim situation.

“There just isn’t the refining capacity in the US to keep up with demand,” he says.

In a note to subscribers in his Capitalist Exploits investment newsletter seen by Asia Markets, MacIntosh discusses the investment implications.

“The obvious conclusion would be to buy refiners like VLO (Valero Energy Corporation), PSX (Phillips 66), MPC (Marathon Petroleum Corp), and DINO (HF Sinclair Corp). They are all cheap. Refining capacity cannot be increased significantly within the next five years at least.

“If you invest in sectors that have done badly over the last 10 years or so while building sound fundamentals, you can sail through a bear market and come out the other side just fine.”

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