The U.S. exported a record amount of crude and fuel last week, despite a growing domestic shortage of gasoline and diesel supplies.
Total petroleum exports last week soared to 11.4 million barrels a day, with exports of diesel and gasoline jumping to a two-week high. Meanwhile, the Energy and Information Administration (EIA) announced earlier this week that U.S. distillate fuel stockpiles (including heating oil), which have been on a stable decline for months, were down to just 106 million barrels, the lowest level in monthly records dating back to 1945, with the East Coast particularly hard hit. Currently, there is only enough supply in U.S. reserves to last 25 days.
“Since conditions are rapidly devolving,” one of the country’s major fuel providers, Mansfield Energy, is now requesting a 72-hour notice for deliveries in order to obtain fuel, according to a statement to clients. The company also noted that “carriers are having to visit multiple terminals to find supplies, which delays deliveries and strains local trucking capacity,” with Tennessee “facing particularly significant issues.”
The fuel scarcity, which has led to rationing in certain regions along the East Coast, will most certainly lead to higher heating and transportation costs, further taxing the already-strained business and household finances.
Facing the possibility of skyrocketing fuel costs and a worsening supply shortage ahead of the midterm elections, the Biden Administration is keeping a close watch on diesel inventories, fearing that the current reserves won’t be sufficient to prevent a serious interruption this winter. While White House officials are currently evaluating measures to increase supplies, many economists are warning that a significant slowdown in freight movement and manufacturing activity is required to stabilize and rebuild inventories. Actually, what is needed is to increase domestic production and reopen the refineries that have been taken offline to prepare for biofuel production.
White House policies that shutdown the Keystone pipeline and curbed drilling and production, which led to refinery closures, sanctions on Russia, and refinery strikes in France have all contributed to the scarcity of refined oil products, gasoline, and diesel.
Across the pond, the diesel crisis in Europe is heating up, with several European countries already starting to run out. For the continent’s heavy industry, the situation is dire as blackouts and unplanned outages result in reduced manufacturing and production. Meanwhile, dozens of LNG-laden ships are queueing off the European coastline, unable to secure slots to unload their cargos. But industry sources say some of the delay is part of a trading strategy to collect higher prices for their cargos, which are sold on a DES (delivery ex ship) basis.
In the meantime, traders have begun diverting cargos bound for Europe, with at least two tankers carrying ~90,000 tons of diesel and jet fuel now headed to the U.S. East Coast. The first is scheduled to arrive in Atlanta on November 3, although the second won’t arrive in New York until a week later.
But experts say, the developing home heating and petroleum shortage is not going away any time soon, and that we can expect to hear a lot more about refineries struggling to keep up with demand this winter.