This is something that really worries me, which I have been pointing out in my weekly podcasts for months. There is no way that that the U.S. can function without a steady supply of diesel. I wonder if Mayor Pete has a clue how serious this is.
-----------------------------------
Global diesel shortage raises risk of oil price spike: Kemp - Reuters News
11-Mar-2022 16:32:55
LONDON, March 11 (Reuters) - Global stocks of diesel and other middle distillates have fallen to the lowest seasonal level since 2008, when similar shortages of these transport and industrial fuels helped to propel oil prices to a record high.
Distillate fuel oil inventories in the United States are 30 million barrels (21%) below the pre-pandemic five-year seasonal average and at the lowest level since 2005, the U.S. Energy Information Administration said.
Stocks in Europe are 35 million barrels (8%) below the pre-pandemic five-year average at the lowest level since 2008, Euroilstock, which compiles inventory data on behalf of the European Union, found.
And middle distillate stocks in Singapore are 4 million barrels (32%) below the pre-pandemic five-year average and also at the lowest since 2008, according to the country’s Ministry of Trade and Industry.
Combined inventories across the three locations have fallen by 110 million barrels compared with the same point last year, as consumption has persistently outpaced production (https://tmsnrt.rs/37aVdIf).
Demand for diesel and other middle distillates is highly geared to the economic cycle since they are mainly used in freight transportation, manufacturing, farming, mining and oil and gas extraction.
The rapid rebound in economic activity after the first wave of the pandemic and associated lockdowns, and its focus on diesel-intensive manufacturing and freight, has boosted use of the fuel.
At the same time, refiners have restrained crude processing to deplete the excess stocks that built up during the coronavirus recession and adapt to lower demand from passenger airlines for jet fuel.
But the continued depletion of distillate inventories has become unsustainable.
Russia’s invasion of Ukraine and the subsequent boycott of Russian fuel threatens to make diesel shortages worse (“Shell, BP halt spot German diesel sales on scarcity fears”, Reuters, March 10).
Actual or potential fuel shortages have been reported in France, Germany, Hungary and Sweden (“Austria's OMV restricts Hungary fuel sales as supply fears grip Europe”, Reuters, March 11).
Distillate production will have to be raised above consumption for a period to rebuild stocks to a more comfortable level.
There is some scope for refiners to boost distillate output by increasing crude processing back to pre-pandemic rates but that will transform a shortage of distillate into a shortage of crude oil.
Pressure to stabilise and rebuild distillate inventories will cause refiners’ crude consumption to accelerate later this year and into 2023.
But the global crude market is already exceptionally tight and the extra crude demand will cause it to tighten further.
The global distillate shortage is threatening to create a severe spike in oil prices just as it did in the first half of 2008.
If prices are adjusted for inflation and converted to 2022 values, Brent crude surged from an already high $135 per barrel at the end of February 2008 (not far from recent prices) to $187 per barrel at the end of June and briefly above $196 in July.
“If something cannot go on forever, it will stop,” economist Herbert Stein, who had been U.S. President Richard Nixon’s chief economic adviser, said in 1986.
In this case, the only question is how the depletion of distillate stocks will be turned around. Faster production. Slower consumption. Or both.
Either the oil industry must find a way to boost crude and distillate supplies or the economic expansion must slow to ease diesel demand.
----------------------
PS: diesel and home heating oil cannot be refined from the Ultra-Light shale oil, which is why cancelling the Keystone XL pipeline is one of the dumbest decisions by a sitting president.
The Diesel Shortage is a BIG PROBLEM - Mar 11
The Diesel Shortage is a BIG PROBLEM - Mar 11
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: The Diesel Shortage is a BIG PROBLEM - Mar 11
From OilPrice.com
"Germany Rattled by Looming Diesel Shortages. European oil majors BP (NYSE:BP) and Shell (LON:SHEL) have not offered spot diesel cargoes for sale in Germany, aggravating fears that without Russian gasoil supplies the German market might be in for a tangible supply squeeze, amidst evaporating inventories."
"Germany Rattled by Looming Diesel Shortages. European oil majors BP (NYSE:BP) and Shell (LON:SHEL) have not offered spot diesel cargoes for sale in Germany, aggravating fears that without Russian gasoil supplies the German market might be in for a tangible supply squeeze, amidst evaporating inventories."
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: The Diesel Shortage is a BIG PROBLEM - Mar 11
Bloomberg 3-11-2022
European oil refiners will probably be forced to cut production of gasoline and diesel as they seek to find alternatives to Russian feedstocks.
Shell Plc, which operates Europe’s biggest oil refinery, said this week that operating rates at some of its plants will be reduced, while finding other crude supplies could take weeks. That would coincide with an already tight market for fuels like diesel, as well as soaring prices at the pump. “We can definitely expect run cuts at many European refineries,” said Jonathan Leitch, an oil analyst at Turner, Mason & Co. “European refiners are competing to secure scant
supplies of alternative grades” with the situation exacerbated by longer delivery times.
Russia’s invasion of Ukraine -- and subsequent international sanctions -- have reshuffled global trade flows as companies seek to avoid Russian crude. Oil companies are reorganizing supplies for their processing plants, potentially transporting cargoes into Europe over greater distances and thus supporting already elevated freight rates.
The loss of crude supply from Russia is just part of the problem for Europe’s refiners. Companies including Greece’s Hellenic Petroleum buy so-called secondary feedstocks such as fuel oil and vacuum gasoil from Russia. They’re by-products of processing crude but can only be made into fuels like gasoline and diesel in the more modern refineries that Russia tends to lack. According to Portugal’s Galp Energia SGPS SA, Russia accounts for half of the world’s supply of vacuum gasoil. The feedstock is often made into diesel.
Run cuts at secondary units are already occurring due to the avoidance of Russian VGO, George Dix, an analyst at researcher Energy Aspects Ltd., said by email. Wider reductions could be made within a few weeks if European refiners can’t source alternatives to Russian crude, he added.
Timing of Curbs
Finding alternatives could be more critical for refineries that are reliant on seaborne supply. Refineries in eastern Europe, as well as two plants in Germany, receive deliveries of Russia’s Urals grade by pipeline. “We expect the impact on crude runs will be concentrated on countries who previously took large quantities of waterborne Urals as baseload,” Dix said.
The timing of processing curbs could depend partly on refinery maintenance, which typically reduces fuels output at this time of year. Shell, BP Plc and Repsol SA have all idled production capacity for routine work, and some of that will be due to return to operations as inventories of crude and other feedstocks are starting to run low.
In the short term, there will probably be enough crude released from storage to keep refineries running at maximum rates, according to Steve Sawyer, director of refining at Facts Global Energy.
“Although natural gas prices are soaring, I think the market is so desperate for diesel, product cracks are also very high and supporting maximum rates,” he said.
European oil refiners will probably be forced to cut production of gasoline and diesel as they seek to find alternatives to Russian feedstocks.
Shell Plc, which operates Europe’s biggest oil refinery, said this week that operating rates at some of its plants will be reduced, while finding other crude supplies could take weeks. That would coincide with an already tight market for fuels like diesel, as well as soaring prices at the pump. “We can definitely expect run cuts at many European refineries,” said Jonathan Leitch, an oil analyst at Turner, Mason & Co. “European refiners are competing to secure scant
supplies of alternative grades” with the situation exacerbated by longer delivery times.
Russia’s invasion of Ukraine -- and subsequent international sanctions -- have reshuffled global trade flows as companies seek to avoid Russian crude. Oil companies are reorganizing supplies for their processing plants, potentially transporting cargoes into Europe over greater distances and thus supporting already elevated freight rates.
The loss of crude supply from Russia is just part of the problem for Europe’s refiners. Companies including Greece’s Hellenic Petroleum buy so-called secondary feedstocks such as fuel oil and vacuum gasoil from Russia. They’re by-products of processing crude but can only be made into fuels like gasoline and diesel in the more modern refineries that Russia tends to lack. According to Portugal’s Galp Energia SGPS SA, Russia accounts for half of the world’s supply of vacuum gasoil. The feedstock is often made into diesel.
Run cuts at secondary units are already occurring due to the avoidance of Russian VGO, George Dix, an analyst at researcher Energy Aspects Ltd., said by email. Wider reductions could be made within a few weeks if European refiners can’t source alternatives to Russian crude, he added.
Timing of Curbs
Finding alternatives could be more critical for refineries that are reliant on seaborne supply. Refineries in eastern Europe, as well as two plants in Germany, receive deliveries of Russia’s Urals grade by pipeline. “We expect the impact on crude runs will be concentrated on countries who previously took large quantities of waterborne Urals as baseload,” Dix said.
The timing of processing curbs could depend partly on refinery maintenance, which typically reduces fuels output at this time of year. Shell, BP Plc and Repsol SA have all idled production capacity for routine work, and some of that will be due to return to operations as inventories of crude and other feedstocks are starting to run low.
In the short term, there will probably be enough crude released from storage to keep refineries running at maximum rates, according to Steve Sawyer, director of refining at Facts Global Energy.
“Although natural gas prices are soaring, I think the market is so desperate for diesel, product cracks are also very high and supporting maximum rates,” he said.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group