No the US wont run out of diesel in 25

No, the US won’t run out of diesel in 25 days

A major US diesel fuel supplier warned of an “oil shortage” on the East Coast on Monday, suggesting that it could push up prices for a variety of consumer goods in the near term.

But even though inventories of diesel and gasoline are lower than in the past, the tight supply of diesel fuel is no reason to panic and the US will not run out, according to energy market experts.

Headlines piled up on Tuesday suggesting the US needs a 25-day supply of diesel. Fox News host Tucker Carlson last week tweeted that “this country is running out of diesel fuel”.

However, the current limited supply does not mean that the US will run out of diesel used to fuel trucks and heating systems during this period.

“Diesel and petrol stocks are below the five-year average and if the whole world stopped we would have 25 days of diesel. But the world doesn’t stop. We don’t expect it to stop.” Ed Hirs, a professor of energy economics at the University of Houston, told CBS MoneyWatch.

He compared the situation to a grocery store’s constant supply of milk.

“Your grocery store may have three days’ worth of milk in stock. That’s because they’re only worth three days at any one time. But the cow continues to milk, the farmer continues to send milk, the dairy continues to deliver,” said Hirs.

Refinery capacity under pressure

However, several factors are currently weighing on the domestic supply of diesel fuel. The tighter than usual offer comes from events that took place back in 2019.

Russia’s war against Ukraine, refinery closures due to COVID-19 and Hurricane Ida, and a fire explosion at a Philadelphia refinery in 2019 have contributed to a reduction in refinery capacity of around 1 million barrels per day, according to GasBuddy energy expert Patrick De Haan.

“As the nation deals with less refining capacity than it was in early 2019, and at the same time as the economy went from zero to 100 mph, there has been a release in pent-up demand and the system has now come under strain,” he told CBS MoneyWatch. “As demand slowly falls, I expect modest improvements across the board, not necessarily [in the] next weeks.”

Europe has also stopped buying oil from Russia as a result of its attack on Ukraine, leading to more competition for diesel fuel for the Northeast.

“Europe is turning to places other than Russia to buy fuel, and it’s competing with the Northeast for a limited amount of diesel,” De Haan said.

However, all this does not mean that the US will run out of diesel.

“That’s not real,” said economics professor Hirs, referring to rumors that the United States could soon run out of diesel.

In terms of available supply, the US is down about 15% year-on-year and 31% compared to two years ago, according to Hirs calculations.

“Now we have 25 days of stock when we would normally have around 35 to 40 days,” he said.

The only way a diesel rush would happen is if buyers panic and start stocking up, Hirs said, adding, “That could cause a problem.”

The price of diesel fuel remains high at around $5.30 per gallon. “Ahead of the holidays, this will be something that keeps commodity prices higher,” GasBuddy’s De Haan said.

Higher delivery costs

While the diesel shortage is not affecting consumers at the pump, it could put pressure on them in the aisles.

When logistics and delivery services pay more for fuel, some of those increased costs are passed on to buyers and could exacerbate inflation in the short term and throughout the holiday season.

“Consumers won’t feel it when they fill up, but when they shop for the holidays, the cost of goods will be higher,” De Haan said. “It will contribute to some level of inflation.”

He noted that Amazon Prime has increased the price of an annual membership, which offers perks like expedited shipping on online orders, by 17% this year.

“Amazon flies more airplanes and pays more for it. Higher fuel prices will be burned into the cost of what you pay for Prime,” he said.

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