A perfect storm in global diesel markets is unfolding. Refining capacities are tight, and stockpiles are being depleted as the Northern Hemisphere cold season begins. Supply crunches could jeopardize critical transportation networks since the industrial fuel powers ships, trucks, and trains. The fuel is also used for heating homes and businesses, as well as a power generation source for utilities.
“Within months, almost every region on the planet will face a danger of a diesel shortage just as supply crunches in nearly all the world’s markets have worsened inflation and hurt growth,” Bloomberg warned.
The economic impact of soaring diesel prices and shortages worldwide could have devastating effects, such as an inflation accelerant that would burden households and businesses.
Both gasoline and diesel prices are linked to crude prices set on the global market. Due to supply constraints, diesel prices in many markets currently demand a hefty premium.
Mark Finley, an energy fellow at Rice University’s Baker Institute of Public Policy, explained to Bloomberg that elevated diesel prices could cost the US economy $100 billion:
“Anything and everything that gets moved in our economy, diesel is there.
“Moving stuff around is one thing. People potentially freezing to death is another.”
Diesel inventories in the US had plunged to the lowest level since 1982 when the government began reporting data on the fuel. Supplies for this time of year are at the lowest levels ever.
According to the Energy Information Administration, the US now has just 25 days of diesel supply, the lowest since 2008; and while inventories are record low, the four-week rolling average of distillates supplied – a proxy for demand – increased to its highest seasonal level since 2007.
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