The fuel market was rocked yesterday by a series of tweets from Craig Fuller, the CEO of Freightwaves, one of the premier logistics and shipping monitors. They included these examples and response (click each tweet to be taken to the source document):
Those initial reports have not (yet) been followed up directly. As of this morning, Freightwaves is reporting:
Continuing declines on the East Coast have raised concerns about adequate supplies for truckers and other consumers.
The one statement FreightWaves has been able to obtain from any of the big three truck stop chains — Love’s, Pilot Flying J and Travel Centers of America (NASDAQ: TA) — was from Love’s last week when a spokeswoman said, “Love’s is monitoring the fluid situation on the East Coast. The company isn’t currently restricting purchases. Love’s will continue to use its logistics and fuel delivery companies, Musket and Gemini, to minimize impacts to customers.”
Requests for comment from those three truck stops Wednesday had not been returned at publication time.
But a Bloomberg report quoted John Catsimatidis, the CEO of United Refining, a small East Coast refiner and fuel distributor, as seeing trouble ahead for diesel consumers.
“I wouldn’t be surprised to see diesel being rationed on the East Coast this summer,” Catsimatidis told Bloomberg. “Right now inventories are low and we may see a shortage in coming months.”
Another factor in the tight market is not new, but with the reduced diesel supplies out of Russia — a major supplier — it is becoming more significant: a loss of U.S. refining capacity.
Refinery utilization nationwide was at 90% last week. That is right about in the middle of where utilization has come for the first weekly report of May over the past six years, excluding the pandemic-related operations of 2020.
The problem from the consumer side is that the base against which that is measured has declined. The current operable capacity listed by the EIA is 17.941 million barrels a day (as of February). At the start of 2020, that figure was at its high-water mark of 18.976 million.
The EIA, in July of last year, said it had removed six refineries from its permanent base of refining capacity. While that can be offset by capacity expansions and de-bottlenecking elsewhere, the end result is that even at full capacity — and the nation’s refining system never operates at 100% — there is less capability to produce refined products in the U.S. than there was two years ago.
There's more at the link.
Just to make life more interesting, the USA is exporting more and more diesel to Europe, where there's a critical shortage of the fuel (and it's fetching record high prices) following the cutting off of supplies from Russia. That's great for those making money out of it - but it leaves us short of fuel we need ourselves.
It goes without saying that diesel is absolutely critical for our economy. Trains and trucks are utterly dependent on it. Without diesel, they'll stop in their tracks. As Karl Denninger reminded us yesterday (bold, italicized and underlined text in original), fuel prices are therefore at the heart of inflation as a whole:
The other Gorilla in the room, fuel oil aka diesel fuel, is up 80% from last year. Until and unless that is stopped and the price comes back down, which will only happen if and when the government ceases its war on fossil fuels, there is no way for the general upward pressure on prices to be reversed. Every piece of farm equipment forward to the delivery of the food to your store runs on diesel. Every single item you buy travels at least the last part of its journey moved by diesel. I do not care how you "feel" about the issues related to the use of fossil fuels, the simple reality is that without them you have no fertilizer, no food and nothing in the store so all of the claims of virtue you issue will make you broke or even cause you to starve.
As if that weren't bad enough, I've been surprised to find many motorists ignoring the risk to our personal mobility. They seem to blithely assume that because our cars run on gasoline, a diesel shortage won't affect us. They couldn't be more wrong. You see, gasoline is delivered to your neighborhood gas station in big tanker trucks - trucks fueled by . . . guess what? Diesel. If there ain't no diesel, ain't gonna be no gasoline, either.
I strongly suggest that we all make a habit of keeping our vehicles topped up. I'm planning to keep mine at not less than two-thirds to three-quarters full, just in case.