Truck diesel recently surged by more than 20 cents as reserves dropped below five-year averages in the Northeast, and U.S. companies increased supplies to European countries impacted by the ban on Russian oil.
Prices at the pump had steadily retreated for nine consecutive weeks after hitting a record high of $5.810 in June. Falling to $4.909 in late August, truckers now stared down a 20.6-cent spike heading into Labor Day weekend. Owner-operators and fleets will likely pass along the expense until it’s absorbed by consumers, and similar-grade heating oil reserves appear to be dangerously low in some of the country’s coldest states.
The distillate category, which comprises truck diesel and home heating oil, is 63 percent lower than the five-year average in New England. States such as Maryland and New York are running 58 percent below the average, with much of the country behind the curve. Passenger vehicle gasoline is also trending low. The Biden Administration recently put pressure on oil refineries and exports to replenish U.S. reserves.
“Given the historic level of U.S. refined product exports, I again urge you to focus in the near term on building inventories in the United States, rather than selling down current stocks and further increasing exports,” U.S. Energy Secretary Jennifer Granholm reportedly stated in a letter sent to major oil companies. “It is our hope that companies will proactively address this need. If that is not the case, the Administration will need to consider additional Federal requirements or other emergency measures.”
The Biden Administration led a charge with European nations to sanction Russian oil after the war broke out with Ukraine. U.S. oil has been trying to buoy Europe’s gasoline and truck diesel needs as winter approaches. In response, Russia slashed natural gas exports to countries that sanction its oil. American companies find themselves in something of a bind as refinery capacity may not be able to keep pace with demand on two fronts.
“It’s going to be a real challenge for us to be able to supply a lot more diesel into Europe,” Gary Simmons, Executive Vice President and Chief Commercial Officer at Valero Energy, reportedly said. With “the industry, basically, running all out, it’s very difficult for me seeing that there’s going to be a lot of flow from the U.S. into Europe.”
U.S. oil concluded its highest level of exports in five years in July, moving 1.4 million barrels per day. Much of those imports went to NATO allies who supported the ban. International politics now put New Englanders at risk of potentially higher inflation and home heating oil shortages this winter. Upwards of 24 percent of Massachusetts homes rely on heating oil. Maine, the most vulnerable in the Northeast, requires heating oil to fuel approximately 60 percent of homes.
As summer wanes, truck diesel prices at the pump are $1.776 more than the same period in 2021. The increases hit all 10 regions covered by the Energy Information Administration, with the Midwest seeing the highest increase at 28.2 cents. Central Atlantic states experienced a 2.5-cent increase, and California remains the only region above $6 per gallon.
Sources:
https://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMD_EPD2DXL0_PTE_NUS_DPG&f=W
https://oilprice.com/Energy/Energy-General/Biden-Administration-Urges-Refiners-To-Curb-Fuel-Exports.html#:~:text=According%20to%20a%20letter%20sent,both%20oil%20and%20fuel%20prices.
https://www.ttnews.com/articles/diesel-supply-below-average-northeast
https://www.ttnews.com/articles/diesel-surges-206c-5115-gallon
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