Diesel Crisis Deepens As Inventories Fall To Dangerous Levels

Yves here. We were banging on about diesel shortages some time back. The fact that other facets of the ongoing energy crisis, such as the hunt for LNG, the Nord Stream pipeline attacks, and European electricity price spikes have come to the fore does not mean the diesel crunch has gone away.

Oddly, the piece below seems to underplay the role of actual and self-sanctioning of Russia oil in this story. It attributes the latests intensification of the crunch to lack of refining capacity. Do expert readers agree that that is the primary factor now? The reason for the query is a search shows a fully of stories on that topic in June, and few of late (ex related to the refinery strikes in France).

As we understand it, Urals crude is medium weight and thus a particularly productive source for diesel fuel. That’s why so many consumer cars in Europe run on diesel. One of the reasons the US bought Russian fuel was that the lighter sweeter US oil was not a great refiner feed stock in terms of producing diesel output; the reason Biden was trying to kiss and make up with Venezuela was to get its heavier grades for this purpose.

I must confess to not monitoring diesel prices. Some readers earlier this year commented that the retail price gap between diesel and regular gasoline had widened greatly. Is this still the case?

By Irina Slav, a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry. Originally published at OilPrice

  • Global diesel and distillate fuel stocks have fallen to dangerous levels.
  • The U.S. has been exporting a lot of diesel to troubled Europe, but now things are changing.
  • U.S. buyers are snapping up diesel cargos originally planned for Europe as the crisis deepens.

While the OPEC+ agreement to cut crude oil production and the U.S. reaction to it dominate headlines, a much more immediate crisis is getting worse by the day.

Global diesel and other distillate fuel stocks have been on the decline for a while now, and there is no reversal of this trend in sight. Demand, on the other hand, has been growing, leading to a widening shortage.

The situation has become so grave that U.S. buyers have begun snapping up diesel cargos originally sailing for Europe.

Reuters reported earlier this month that at least three tankers carrying diesel from the Middle East had changed their course mid-journey and were now traveling to the United States. And this new competition is about to intensify.

The foundation of the shortage is the gap between refining capacity and fuel demand. The pandemic saw a lot of refineries close, especially in the United States. It wasn’t just the pandemic itself—the anticipation of a boom in demand for EVs that would render a lot of refining capacity obsolete also had a part to play, as Reuters’ John Kemp noted in a column last week.

This boom has yet to materialize, however. In the meantime, fuel demand remains robust, resulting in a shortage. In Europe, there have been contributing factors, such as the French refinery workers’ strike, which has made the shortage much worse than it would have been otherwise, and the upcoming planned maintenance-related refinery closures

Europe is currently buying a lot of Russian diesel to fill the gap, but this will have to stop next February as the embargo on Russian fuels kicks in, further aggravating an already complicated situation with the supply of middle distillates in a major consuming region

Argus reported this week that Europe is in for a major diesel supply shock because of low inventories and strong demand. And the level of inventories had a lot to do with the unplanned outages at European refineries before maintenance season, including the four-week drop in French fuel output amid the workers’ strike.

On top of that, the article quoted traders as saying there has been little incentive to build diesel inventories in the current market situation: diesel is strongly backwardated right now, so from the perspective of refiners and commodity traders, there is little sense in stockpiling.

In the United States, meanwhile, distillate stocks have fallen to 106 million barrels, which is the lowest since records of these stocks began back in 1982, Reuters’ Kemp reported. Europe is doing a little better, with distillate stocks at 360 million barrels at the end of September, the lowest seasonal since 2007.

The U.S. has been exporting a lot of diesel to troubled Europe, but now things are changing, and not just because cargoes are being diverted from Europe to the U.S. coast. Refiners in the United States are bracing for a possible ban on fuel exports.

Floated earlier this year by the White House, the idea of banning fuel exports to secure supply for the local market prompted the CEO of the American Petroleum Institute and the head of the American Fuel and Petrochemical Manufacturers to warn against such a move.

A ban on exports could “decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war,” Mike Sommers from the API and Chet Thompson of the AFPM wrote to Energy Secretary Jennifer Granholm.

Yet right now, U.S. buyers are snapping up diesel cargos from Europe in a way similar to how Europe has been snapping up LNG cargos originally meant for Asian destinations. And supply is not going up fast enough because there is not enough refining capacity for it to go up fast enough or even meaningfully enough. And this spells a lot more trouble for both Europe and the U.S., especially in the inflation department.

Print Friendly, PDF & Email


  1. James Gruber

    I can’t speak for any other part of the U.S, but in south eastern Pennsylvania the price differential between
    regular gas and diesel is averaging about $2.00 per gallon. It can vary some what depending upon retailer and location but this is up from about $1.00 per gallon 6 months ago. These numbers are not exact but I just started driving a diesel truck and thus my attention has been heightened. Home heating oil and diesel are very similar grades. The price and scarcity is not going to be good for the north east US consumer who primarily rely on home heating oil to stay warm. The continued release of oil from the strategic reserve will not help if refinery capacity is already maxed out.

  2. Jack

    Here in SC diesel has been above $5 a gallon for quite a while, It just recently dropped a little. Yesterday I observed regular unleaded at $3.11 and diesel at $4.82 at the lowest priced station. I haven’t seen any instances of diesel not being available.

    1. Rui

      So, 1 gallon (US) has 3.7854 litres. You pay $4.82/gallon, that is $1,2733/litre (I don’t know if that is before sales tax?). The Euro is near parity with the dollar, so that is also more or less 1,273€/litre of diesel.
      In Portugal, diesel was always cheaper than gasoline until the sanctions on Russia this year. It is now more expensive. I paid 1,959/litre for diesel here in Portugal 2 days ago (all taxes included). It cost me 105€ to fill the tank. We laugh so we don’t cry.

  3. BeliTsari

    Jeepers, you don’t think, that this might have something to do with the ginormous protests, cops are beating down; invariably attributed (verbatim) to being, “contre la vie chère, l’inaction climatique et la réforme des retraites,” as opposed to folks, unable to get to shitty jobs, indentured ever deeper by NATO caused inflation, fuel shortages?


    Hey, I didn’t name their Bellingcat, lie-spewing blog!

  4. Dave in Austin

    This will change after the election. The administration is understandably focused on that issue.

    A shortage of diesel in Europe is a political problem; a shortage of heating oil in the northeast US would be a political disaster. US producers are unwilling to buy high-priced oil and turn it into high-priced diesel for inventory when the market is pricing-in a recession,which will lower demand and probably the price of crude and diesel. Why produce a product today which will be worth less tomorrow? And unlike crude, you can’t store diesel easily for long periods of time.

    In the past US administrations have had the ability to jawbone local refiners. Now with a reduction in US capacity that is less possible. One more effect, I think, of the slow deindustrialization of the US.

    1. Scoville

      As Mr. Biden said in March when he opted for the first anti-Russian sanctions; “We’ll all suffer for Ukraine–for as long as it takes!”

      That’s what I like to remind supermarket clerks, baristas, people at the gas station, whenever someone complains about inflation and high prices.

      “For as long as it takes”, maybe twenty years like the losing Iraq war that he voted for?

      1. John k

        For years we swapped diesel to eu in exchange for gasoline because our cars are almost all gasoline while in the eu a much larger percentage are diesel; refineries on both sides could optimize what they get from each barrel of crude. So potentially eu diesel shortage would be much worse than here, but we’ve continued supplying them with our diesel, which refiners are quite happy to do because of their higher price.
        Us northeast does look to be short diesel and very similar home heating oil this winter (solidarity with Europe!), imo local unhappiness will be ignored after midterms. And nothing is likely to be done now because markets/profits.

  5. Tom Pfotzerr

    Delta between regular and diesel is $2.10. Regular: $3.39, Diesel $5.49. Yesterday’s price @ most economical outlet in town.

    Last year there was about a $0.50 differential between gas and diesel.

  6. Lex

    I would assume that refining capacity is a problem but I couldn’t quantify it. The Husky Superior refinery had a major fire almost four years ago and is still not back to full production. The BP-Husky refinery in Toledo had a major fire this fall and reports are that it won’t even begin restart until 2023 but there are also rumors that BP is trying to sell its stake. Toledo is a major refinery for the midwest including diesel (I assume that they process tar sand crude into diesel, heating oil and asphalt because I know the crude/gas transport infrastructure of the area very well and that’s a major node.)


    1. paul.w

      After watching youtube videos from the Chemical Safety Board I found out major catastrophes at industrial plants are a fact of life.
      I think the lack of new refineries for petroleum products is another example of governments failures to plan ahead. Kind of like there is no national solution to nuclear waste. What would happen to the price of gasoline if a hurricane destroys the refineries on the gulf coast?
      I’m still looking for the essay I read online by an author in about 2010 that argued gas should be taxed higher. That was when gas was approaching $5 a gallon. He argued that when it went back down it should be taxed to stay at that level to continue the beginnings of conservation that had started.

      1. Jeremy Grimm

        I believe the idea of raising the tax on gasoline to strongly encourage conservation is older than 2010, and probably older than the proposed Clinton tax from 1993.
        Clinton’s Stealth BTU Tax [https://cei.org/publication/clintons-stealth-btu-tax/]

      2. Mg2SiO4

        Smelting and metals refining are the same way; the US has absolutely huge supply chain risk there are something like only three copper smelters remaining in the US, and maybe no lead or zinc smelters remaining. Mostly concentrates are shipped to China for smelting but also Korea and Mexico. If one of those countries says “you know what? We’re not going to accept your concentrate, process it yourself” the US would be in a very tight spot.

      1. Lex

        Note that the Superior refinery and the Toledo refinery were both Husky operations, if you know what i’m saying. The Superior terminal started with an alky unit that exploded. Fortunately, the crew working near it went on break <10 min before the explosion or there would have been a fair number of deaths.

  7. VT Digger

    Yes. Diesel is $5.35 in VT right now.
    That’s not the real jaw dropper though, heating oil (which is red-dye diesel) is $5.15.
    In 2020 is was $2.14.
    I still don’t understand why people aren’t talking about this (probably because there is zero anyone can do about it)
    You usually need 2 fills minimum to get through winter, one fill right now will run you $1500. Good luck out there!

    1. James Gruber

      Here in Berks County PA diesel runs from $5.79 to $6.28 per gallon with regular gas $3.85 to $3.99. Berks is a diesel desert which explains some of the price differential. Several of the surrounding Counties are $0.20-$0.30 cheaper. The past several years have seen a massive increase in large warehouse complexes along the I-78/US 222 corridors in the county. There are several more under construction/planning in Berks. This increase in heavy truck traffic is/will spur demand and thus price increases. The Open Roads and Gas Buddy apps can be useful in showing gas and diesel price ranges in select areas. However neither app shows all station options.

  8. The Rev Kev

    It’s ironic that Biden has been forced to talk to both Venezuela and Iran about bringing their oil to the market to bring the price of oil down but that they each told him that due to the sanctions of the past few years, that it is not possible for them to do so any time soon and that it might takes years of investments and sanction relief to expand their oil production.

    1. Altandmain

      They all understand that this is a short term play and that the US is not going to honour long term agreements.

      Once the shortages stop, the US will go back to trying to regime change these nations.

  9. Jeff N

    Diesel is up $0.20/gal here in Chicago burbs.

    Can you imagine the optics if there are “no diesel today” signs at fuel stations, semi-trucks out of fuel on the sides of highways, electro-motive diesel trains parked..

      1. Tom Stone

        It’s a lot more than 300 Million guns, no one knows how many more.
        The late Kevin R.C O’Brien looked at manufacturer’s records for the then prior 20 years and showed 330 Million Guns sold to Americans during that time.
        That was 8 or 9 years ago…
        They can last a long time, I mentioned that an acquaintance had inherited a Chaffee-Reece rifle made in 1882.
        I have good screwdrivers so I detail stripped, cleaned and lubed it and put it back together for him, one moderately buggered screw and a few dents in the stock, maybe 1% of the original finish, strong rifling and no rust.
        He bought headspace gauges and after a close visual inspection had the bolt magna fluxed.
        He has since bought a box of factory ammo and plans to take it both deer and pig hunting.
        That rifle is 140 years old and still in good working condition.
        Barring fire or rust they can last centuries in good working order and they have been accumulating in the USA for a long time.

    1. John k

      This is the really critical issue. If diesel shortage gets much worse our distribution system goes down. Not just trucks but trains and ships, too. It’s not enough to be able to make stuff, we also have to deliver it.
      ‘Russia is just a gas station’, was never true, but certainly they were a vital eu fossil supplier, and now eu is finding we can’t replace them (did eu ever really believe we could?)
      Beyond that, fossil is food. Farmers are big nat gas consumers for fertilizer and diesel consumers for tractors/trucks. Netherlands farmers’ demos were snuffed, but now eu critically needs ukr grains… Russia is unlikely to allow more shipments given the eu side of the deal allowing Russia to export grain was not met.

  10. Altandmain

    Perhaps it is being overlooked, but higher diesel prices will mean that food prices will increase.

    Lots of diesel fuel is used in modern agriculture and any price increases in the price of fuel will be passed on to the customer.

    Many people are already struggling with the price of food. It’s going to get worse with this diesel shortage.

    I suspect that the US will likely have to pass a ban on export capacity. Shortchanging Europe is a political problem, but cold, starving, Americans is a survival problem for the Biden regime, as is high gas prices, which is why he was so desperate for the Saudi government to produce more oil.

    Another consideration is that the US is depleting its strategic reserve. That is likely to give OPEC more leverage after 2022.

    1. Tom Pfotzer

      Great points. Here’s another one.

      OPEC: pump more oil, OK? We’re capping prices, hope that helps inspire you.

      If only the presidential election was happening now.

      === Political ad storyboard…

      Soccer Mom pulls into gas station to fill up on the way to the grocery store. Camera pans to her wallet: $120 dollars in there, gets the family through the week.

      25 gals gas, bill is $87.

      Then she’s in the grocery store, cart and two kids. She’s got $33.


      No need to continue. Some of you may have had this experience, and it’s searing.

  11. Irrational

    Greetings from Europe. Diesel used to be roughly $1 cheaper per gallon than petrol (gas), now it is $1 more expensive. I have seen many stories that energy-intensive companies are switching from (natural) gas to oil, adding another component to the competition between households and transport.

    1. Tom Stone

      Diesel has dropped to the same price as Premium at my local cheap station, $6.89 per Gallon.
      Sonoma County

  12. Tim

    California similarly has experienced extreme price increases due to lack of refining capacity. It was almost $7/gallon for premium last week in my neck of the woods, but is coming down a bit now.

    If plans for EV dominance and lack of returning to driving were really the culprits I could see projections for California in those areas easily being way overdone.

    1. Tom Stone

      Tim, look at a map of the Hayward/Rogers Creek fault and then look at the Oil infrastructure in Contra Costa and Solano Counties.
      It’s not just the refineries, look at the storage and transport systems.
      It is going to be one godawful toxic mess.
      There aren’t many pics of the 1868 quake, however those that still exist are quite clarifying.
      How much disruption do you think having those refineries out of business for 3 years would cause?
      The disaster planning for the next big quake is too sad to be a joke.

  13. Glen

    Here in the smokey PNW, cheapest gas is $4.00 and diesel is at least $5.50*.

    And it is warm and smokey. Visibility is maybe a mile or two.

    * Prices on the res, so no state/local taxes.

Comments are closed.