中文
By Thomas W. Pauken II
The United States is only holding enough stockpiles of diesel nationwide that is expected to last for about three weeks or even less time, according to the Energy Information Agency (EIA). Hence, diesel prices are surging while the U.S. President Joe Biden's administration is scrambling to contain the challenge.
Delivery trucks largely run on diesel fuel while this energy resource plays a crucial role in logistics services industry across the globe. It's apparent that the U.S. economy is going out of steam. Even if the White House implements emergency measure to increase stockpiles, it's only a short-term stop gap that could result in catastrophic mid- to long-term consequences.
U.S. National Economic Council Director Brian Deese raised alarm bells over the diesel shortages on Bloomberg TV news and suggested the Biden administration is mulling, "all options are on the tables" in order to boost supplies and lower diesel prices.
Nonetheless, prices are high, according to the American Automobile Association (AAA) with diesel selling at $5.324 per gallon, which is about 50 percent higher than this time a year ago. Diesel is regularly priced at lower rates than unleaded gas, but this year it's no longer the case.
From a historic perspective, diesel is a reliable source of fuel and until recently was stored in abundance while refineries and pipelines could deliver the supply to gas stations with good efficiency.
A truck carrying fuel oil leaves a fueling depot in Brooklyn borough of New York, United States, March 8, 2022. [Photo/Xinhua]
U.S. refineries confront tough challenges
The basic rules of supply and demand apply today just as they have done so since human beings have lived in an economic age. It's understood that when supply is lower that would increase demand; while high supply would lead to lower demand. The energy markets are volatile and speculative, while deeply impacted by supply and demand constraints.
This year, the oil and gas markets have witnessed much supply and pricing volatility on account of the Russia-Ukraine war, tough Western-led sanctions against Russia, as well as the Biden administration enforcing tighter restrictions on domestic oil and gas production levels.
The Wall Street investment bank Goldman Sachs warned in a report issued earlier this week that the diesel shortage is spreading across Europe as well, which will spark soaring fuel prices this winter.
In the U.S., Goldman Sachs cites underinvestment in refining capacity and refinery closures and operation disruptions for contributing to the depletion of refined oil products in 2022, while diesel has been very hard hit.
"Refining constraints can create a sharp wedge between where crude and product markets clear, making policy management of crude supply less effective at controlling consumer prices," Goldman Sach's analysts wrote in a note.
The refineries are crucial to producing more diesel deliveries, but the Environmental Protection Agency (EPA) has increased regulations on refineries as they are deemed high polluting. The stricter measures have led to more unscheduled closures or temporary suspensions of refineries.
The maintenance of U.S.-based refineries has a huge impact since operators are required to integrate new green technology devices to meet EPA mandates. This delays the refineries from going back into full operations, while diesel suppliers are struggling to deliver stocks to their customers in a timely manner.
Emergency measures are counter-productive
The U.S. could indeed run out of diesel in its national stockpiles by next month, but the Biden administration is not playing it smart.
According to media reports, the Biden administration is looking into expanding a little-used emergency fuel reserve in New England since the East Coast remains mired by serious shortages of both gasoline and diesel.
Reportedly, White House officials expressed concerns that the one million-barrel reserve could not counter a severe disruption this winter and they are thinking about a number of other options to jumpstart supplies.
One option being considered could be formally requesting Congress to lift a statutory cap on how much oil can be held in the reserve. There have also been discussions about: mandating private enterprises to hold minimum inventory levels, which also would require congressional approval, as well as export bans that could be imposed through executive powers.
According to media reports, no final decisions have been made but as diesel supplies stay low, don't be surprised if Biden takes emergency steps to reverse course. The oil and gas exports' bans would deliver a shocking blow to the economies of the European Union and the United Kingdom if Washington does implement this plan later on.
Diesel keeps truck rolling
The diesel shortages in the U.S. will disrupt much of the world economy. The U.S. has failed to boost energy supply and the Biden administration should consider easing environmental regulations to make it easier for more refineries to reopen.
Calling for trucking companies to reconvert their fleets into electric vehicles (EVs) would not be a viable option for them at the moment. Electric-run trucks are costly and it would take years, not months, for such vehicles to become a suitable replacement for diesel-fueled trucks.
Consequently, global supply chains will face serious disruptions in the near future and it comes at a bad time for Americans. The Christmas holiday shopping season is coming soon and trucks delivering goods to stores could be stalled.
Thomas W. Pauken II is the author of "U.S. vs China: From Trade War to Reciprocal Deal," a consultant on Asia-Pacific affairs and a geopolitical commentator.
