The White House announced last week that President Joe Biden is prepared to release more crude oil from the national Strategic Petroleum Reserve (SPR) in an effort to stabilize gasoline and diesel prices ahead of the midterm elections in November. This is in addition to the administration’s six-month initiative to release 180 million barrels that started earlier this year.
The United States maintains only 25 days of diesel supply, the lowest since 2008, according to recent data from the Energy Information Administration (EIA). This is down from 34.2 days in the previous four weeks. Total national stockpiles stand at 106.187 million barrels, down approximately 34 percent since Biden took office. EIA numbers confirm that demand eased in the past week, coming in at 4.072 million barrels. But consumption is still up nearly 20 percent compared to the previous four weeks.
“Yet, this is not helping the diesel crack spreads which exploded once again. Heating oil and distillate supplies are tight across the world, and while economic turmoil continues to keep oil locked in a trading range, it’s perhaps a matter of time before oil prices scream to the upside,” wrote Phil Flynn, an energy analyst and author of The Energy Report.
In the Northeast United States, a part of the country that typically burns more fuel for heating than any other part of the nation, stockpiles are sitting at their lowest levels since April 1992.
National Economic Council Director Brian Deese recently told Bloomberg TV that the Biden administration could tap into the Northeast’s emergency diesel reserves if inventories do not rise fast enough.
The White House has also left the door open to an export ban on gasoline, diesel, and other refined petroleum products. But the proposal has garnered criticism from oil and gas industry leaders.
“Banning or limiting the export of refined products would likely decrease inventory levels, reduce domestic refining capacity, put upward pressure on consumer fuel prices, and alienate U.S. allies during a time of war,” wrote Mike Sommers, American Petroleum Institute (API) president and CEO, in a letter to Secretary of Energy Jennifer Granholm.
Meanwhile, there could be some relief as two vessels carrying about 90,000 tons of diesel and jet fuel are scheduled to arrive in New York after being diverted from their original European destinations. In addition, Delta Air Line’s Trainer refinery in Pennsylvania is poised to return from seasonal maintenance, which will help expand regional diesel output.
Since 2020, the United States has lost about 1 million barrels per day in operable refining capacity. Over the last decade, the number of refineries has plunged, to 129. In the Northeast, there are only seven refineries left.
Overall, this is a concerning development for the trucking industry, because diesel is the second-highest cost for trucking firms, behind labor. With the American Trucking Association (ATA) reporting a shortage of 80,000 drivers and soaring diesel prices affecting the bottom line of companies, it could be a troubling time heading into one of the year’s busiest periods.