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Struggling farmers face another challenge with diesel shortage

Farmer Fuel
Three generations of the Heinrich family of farmers in front of a combine that Tim, right, says can go through 150 gallons of diesel fuel on a busy day. Heinrich family

Just weeks after Oklahoma Gov. Kevin Stitt signed an executive order to continue drought relief efforts for farmers in that state, reports of what some are calling a devastating diesel shortage and the higher prices that come with it are rolling in to accompany farmers into the already harsh winter season.

“I’m harvesting soybeans that aren’t even worth harvesting right now,” Oklahoma farmer Tim Heinrich said last month.

Heinrich, who runs a 3,000-acre operation in north central Oklahoma, says a modern combine like the one he uses typically needs about 150 gallons a day to get the job done — a job that might ultimately cost him more in fuel than he will get back in sales. And the combine is just one piece of the operation affected by diesel costs.

“Most of us have diesel pickups that we use to feed cows with all winter long, all the trucks hauling the crops to and from the farm, all of our farm sprayers, our combines and our tractors,” said Heinrich, who also serves on the Garfield County Conservation District board of directors. “All of it is at the mercy of the rising cost of diesel.”

The U.S. Energy Information Administration said in its Short Term Energy Outlook in November that diesel prices were nearly 50% higher than they were a year earlier, and reserves were at the lowest level since 1951.

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World’s most-crucial fuel diesel heads for shortage touching everything

World’s most-crucial fuel diesel heads for shortage touching everything

Within the next few months, almost every region on the planet will face the danger of a diesel shortage


diesel
Photo: Bloomberg

No fuel is more essential to the global  than . It powers trucks, buses, ships and trains. It drives machinery for construction, manufacturing and farming. It’s burned for heating homes. And with the high price of natural gas, in some places it’s also being used to generate power.

Within the next few months, almost every region on the planet will face the danger of a  shortage at a time when supply crunches in nearly all the world’s energy markets have worsened inflation and stifled growth.

The toll could be enormous, feeding through into everything from the price of a Thanksgiving turkey to consumer bills for heating homes this winter. In the US alone, the surging  cost will mean a $100 billion hit to the economy, according to Mark Finley, an energy fellow at Rice University’s Baker Institute of Public Policy.

“Anything and everything that gets moved in our economy, diesel is there,” Finley said. “Moving stuff around is one thing. People potentially freezing to death is another.”

In the US, stockpiles of diesel and heating oil are at their lowest point ever for this time of year in data going back four decades. Northwest Europe is also facing a low buffer — inventories are forecast to hit a low this month and then tumble even more by March, shortly after sanctions come into play that will cut the region off from Russian seaborne supplies. Global export markets have gotten so tight that poorer countries like Pakistan are getting shut out, with suppliers failing to book enough cargoes to meet the nation’s domestic needs.

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US Diesel Shortage, Code Red. Is It Time To Panic?

US Diesel Shortage, Code Red. Is It Time To Panic?

Fuel company issues diesel shortage warning, says conditions ‘rapidly devolving’

A major fuel supply and logistics company is raising a red flag on upcoming diesel foul shortages.

Mansfield Energy issued the alert Friday stating there was a developing diesel fuel shortage in the southeastern region of the United States. The company speculated that the shortage could be generated from “poor pipeline shipping economies” and a historically low supply of diesel reserves.

“Poor pipeline shipping economics and historically low diesel inventories are combining to cause shortages in various markets throughout the Southeast,” the company said. “These have been occurring sporadically, with areas like Tennessee seeing particularly acute challenges.”

Diesel and heating oil inventories are down for the Northeast from Maine to Maryland. iStock

Diesel and heating oil inventories are down for the Northeast from Maine to Maryland. iStock© iStock

States expected to experience serious affects of the shortage include Maryland, Virginia, Alabama, Georgia, Tennessee, North Carolina and South Carolina.

The Biden administration says it is keeping a close watch on diesel inventories and working to boost supplies following news that reserves have been depleted and could run out in less than a month if not replenished, sparking fears of shortages and rising prices.

President Biden announces his administration's plans to eliminate junk fees for consumers, Oct. 26, 2022, in the South Court Auditorium on the White House campus in Washington. AP Photo/Patrick Semansky, file

President Biden announces his administration’s plans to eliminate junk fees for consumers, Oct. 26, 2022, in the South Court Auditorium on the White House campus in Washington. AP Photo/Patrick Semansky, file© AP Photo/Patrick Semansky, file

The Energy Information Administration (EIA) reported this week that, as of Oct. 14, the U.S. had only 25 days of reserve diesel supply, a low not seen since 2008. National Economic Council Director Brian Deese acknowledged to Bloomberg that the level is “unacceptably low,” and “all options are on the table” to address the situation.

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Major Fuel Supplier On “Code Red” As Diesel Crisis Hits Southeast

Major Fuel Supplier On “Code Red” As Diesel Crisis Hits Southeast

Diesel supplies are very scarce across the Northeast and in the Southeast. Supplies are at the lowest seasonal level for this time of year, and the US only has 25 days left of the industrial fuel in storage. The crisis gripping the diesel market appears to be getting out of hand as one fuel supply logistics company initiated emergency protocols this week.

“Because conditions are rapidly devolving and market economics are changing significantly each day, Mansfield is moving to Alert Level 4 to address market volatility. Mansfield is also moving the Southeast to Code Red, requesting 72-hour notice for deliveries when possible to ensure fuel and freight can be secured at economical levels,” Mansfield Energy wrote in an update to customers on Tuesday. The trucking firm has a fleet of tankers that delivers refined fuel products to more than 8,000 customers nationwide.

Mansfield said in many areas on the East Coast, diesel fuel prices are “30-80 cents higher than the posted market average, because supply is tight.” 

“At times, carriers are having to visit multiple terminals to find supply, which delays deliveries and strains local trucking capacity,” the notice continued.

This could mean that the US diesel market is so tight that supplies are running very low in certain areas. The crisis has sent supplies of the industrial fuel that power the economy, from trucks to vans to generators to freight trains to tractors, to the lowest level ever for this time of year.

The latest EIA data shows there are only 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 – rose to its highest seasonal level since 2007.

Mansfield’s is a warning sign that the record low storage levels is beginning to impact fuel supply networks.

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Farm grade diesel shortage could threaten new crops

DOVER, Fla. — A tax-free diesel fuel shortage for farmers in Central Florida is threatening crops and could send prices for agriculture commodities skyrocketing by early next year.

Farmers are reporting a shortage of diesel fuel from suppliers at the port, which is leading them to fuel up at local pumps in competition with the general public, and paying full price per gallon of fuel.


What You Need To Know

    • Diesel fuel shortage for farmers in Central Florida could threaten crops
    • Farmers are reporting a shortage of diesel fuel from suppliers at the port
  • Diesel fuel is heavily used by farmers to help power water pump houses to water crops

“Every time our fuel supplier goes to the port they are being told that the allocations aren’t there for them,” said Matt Parke with Parkesdale Farms in Dover. “So we are really having to go to different gas stations to get regular road diesel out here.”

Diesel fuel is heavily used by farmers to help power water pump houses that get water onto newly planted crops.

Without diesel fuel, Parke says new crops could be at risk.

“If they run short and we are in the middle of trying to live these plants in, you know, they are going to die,” said Parke. “And we will have 50 to 80 percent loss.”

Standing next to a bagged diesel pump, Bennett Station owner Darwish Elhajji says he’s seeing the struggle over the fuel shortage daily.

Bennett Station is a bulk supplier for the kind tax-free diesel farmers in Plant City use for everything from water pump houses to tractors and other field equipment.

“Any negative effect to the crop in this city will affect everyone, it will be a trickle down,” Elahjji said.

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Major Trucking Firms Prepare For “Imminent Diesel Shortage In Eastern Half Of US”

Major Trucking Firms Prepare For “Imminent Diesel Shortage In Eastern Half Of US”

Major trucking fleets across the eastern half of the US are preparing for an “imminent” diesel shortage, according to logistics firm FreightWaves.

Founder and CEO of FreightWaves Craig Fuller said “3 very large fleets” are preparing for diesel pumps at fuel stations to run dry. Drivers of these fleets received notifications about fuel shortages that could materialize in the coming weeks across the Mid-Atlantic and Northeast regions.

Fuller tweeted several messages that drivers received from fleet operators. The notifications were alarming.

He also tweeted what appears to be an unnamed industry insider explaining the historic mess hitting Mid-Atlantic and Northeast markets is a combination of crude being diverted from the US to Europe and supply chains issues along the East Coast.

Diesel supply is short worldwide due to the invasion of Ukraine disrupting energy markets and resulting Western sanctions. The writing has been on the wall for months about developing shortages, as we discussed in:

On Wednesday, DOE showed US diesel inventories are now 23% below the five-year average for this time of year, at their lowest since May 2005.

The situation isn’t improving as diesel prices at the pump soar to new highs.

Retail gas prices are also legging higher.

And who does President Biden blame this time for possible fuel shortages? Can’t keep blaming Putin for every problem.

Widespread US Diesel Shortages Send Crack Spreads To Mindblowing Highs

Widespread US Diesel Shortages Send Crack Spreads To Mindblowing Highs

Global stocks of refined petroleum products have fallen to critically low levels as refineries prove unable to keep up with surging demand especially for the diesel-like fuels used in manufacturing and freight transportation. The result has been a surge in prices refiners receive for selling fuels compared with prices they pay for buying crude and other feedstocks, boosting their profitability significantly.

In the United States, refiners currently receive roughly an average of more than $150 per barrel from the sale of gasoline and diesel at wholesale prices, while paying only around $100 to purchase crude.

The indicative 3-2-1 margin of $50 per barrel is based on the assumption a refinery produces two barrels of gasoline and one barrel of diesel from refining three barrels of crude.

The margin is meant to be representative for an “average” refinery and is a gross figure out of which refiners have to pay for labor, electricity, gas, hydrogen, catalysts, pipeline transport and the cost of capital.

Net margins are narrower and refinery costs have been rising rapidly as result of widespread inflation ripping through the economy following the coronavirus pandemic. Nonetheless, even allowing for rising input costs, gross margins have more than doubled from $20 at the end of 2021, ensuring refiners have a strong financial incentive to maximize crude processing and fuel production.

DISTILLATE FOCUS

Gross margins are currently higher for making diesel (almost $60 per barrel) than for gasoline ($45 per barrel) reflecting the relative shortage of middle distillates.

U.S. distillate fuel oil stocks are 31 million barrels (23%) below the pre-pandemic five-year average compared with a deficit of only 6 million barrels (3%) in gasoline.

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Rationing Looms As Diesel Crisis Goes Global

Rationing Looms As Diesel Crisis Goes Global

  • Russian refiners cut processing rates of diesel fuel.
  • Already tight diesel supply is getting even tighter.
  • Vitol’s chief executive Hardy: diesel supply shortage could trigger rationing in Europe

Earlier this week, Vitol’s chief Russell Hardy warned that a diesel shortage could trigger fuel rationing in Europe. Now, those warnings are multiplying, with fuel rationing no longer looking like an abstract idea. Europe is risking a blow to its economic growth, Reuters reported on Thursday, citing experts. Diesel is what freight transport uses to deliver goods to consumers, but it is also what industrial transport uses for fuel. With Russian refiners cutting their processing rates in the wake of several waves of Western sanctions, already tight diesel supply is going to get a lot tighter.

“Governments have a very clear understanding that there is a clear link between diesel and GDP, because almost everything that goes into and out of a factory goes using diesel,” the director general of Fuels Europe, part of the European Petroleum Refiners Association, told Reuters this week.

As Vitol’s Russell Hardy noted earlier this week, “Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East. That systemic shortfall of diesel is there.”

Europe is not the only one feeling the diesel pinch, however. Middle distillate stocks are on a decline in the United States, too, Reuters’ John Kemp wrote in his latest column.

Distillate inventories, according to EIA data, have booked weekly declines for 52 of the last 79 weeks, Kemp reported, falling to 112 million barrels last week. The total decline for the last 79 weeks amounts to 67 million barrels. Last week’s inventory level was the lowest since 2014 and 20 percent lower than the five-year average from before the pandemic.

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