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Is Diesel Fuel About to Become Even More Expensive?

January 30, 2023 By The Editors

By Billion Photos @ Shutterstock.com

Diesel fuel is the lifeblood of the supply chain, powering both freight trains and trucks. Supplies of diesel have been tight for years now, and refineries that have been pushing off maintenance for years can’t hold it off much longer. Will maintenance shutdowns create a new spike in diesel prices? Denton Cinquegrana reports for The Wall Street Journal:

Diesel makes the economy go, but it was only last year that the price of the fuel became the stuff of dinner-table conversation.

Retail diesel prices soared to an all-time high of $5.816 a gallon last June 19, part of the big run-up in energy costs following Russia’s invasion of Ukraine that strained transportation budgets and fed inflationary pressures. Though prices have dropped by more than $1 a gallon since then, many of the same elements that drove the surge in prices remain firmly in place.

Throughout the U.S., diesel supplies remain tight; the East Coast in particular has been pressed to keep tanks fully stocked. Based on data from the Energy Information Administration, U.S. distillate stocks, which include diesel, are at least 28 million barrels below the five-year average. The East Coast accounts for more than half that deficit.

Some of the supply issues go back to pre-Covid 19 events, including a June 2019 fire that took out a key East Coast refinery. The Philadelphia Energy Solutions refinery had provided about 30% to 35% of diesel to the mid-Atlantic and Northeast markets. The permanent loss of that refinery has made the East Coast dependent on supply from a pipeline to the Gulf Coast and overseas imports, as well as local refineries.

A few more events on the horizon are likely to keep prices for refined products like gasoline, diesel and jet fuel at relatively high levels through the second quarter.

The first is the U.S. refining maintenance season.

This is expected to be a year of hefty maintenance because refineries deferred important work during 2020 and 2021 due to Covid-19. Many limited the movement of outside maintenance contractors on their sites, and in 2022 maintenance work was put off as companies sought to shore up deteriorating profit margins.

But refineries can’t postpone maintenance forever, and the bill is coming due in terms of costs and down time at the facilities.



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