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There Is Only 25 Days of Diesel Supply, the Lowest Since 2008

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64 comments on There Is Only 25 Days of Diesel Supply, the Lowest Since 2008

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Bloomberg reports Diesel Supply of Just 25 Days Poses Problem for Biden

Key Points 

  • The US is has just 25 days of diesel supply, the lowest since 2008, according to the Energy Information Administration. 
  • The four-week rolling average of distillates supplied, a proxy for demand, rose to its highest seasonal level since 2007. 
  • National Economic Council Director Brian Deese told Bloomberg TV Wednesday that that diesel inventories are “unacceptably low” and “all options are on the table” to build supplies and reduce retail prices. 
  • In New England, where more people burn fuel for heating than anywhere else in the country, stockpiles are less than a third of typical levels for this time of year.
  • At least two vessels carrying around 1 million barrels of diesel are due to arrive in New York after being diverted from their original destinations in Europe.

That last bullet point is interesting. Did we call back exports headed for Europe?

Craig Fuller Chimes In 

https://twitter.com/FreightAlley/status/1584604356145389569

“Diesel is the number two cost for US trucking companies outside of labor. This is horrible news heading into one of the worst freight markets in years.”

Price of Trucks Dropping Fast

https://twitter.com/TruckinTraders/status/1584610359427547137

Long Term Diesel Price 

EIA price data, US average price, chart by Mish

Diesel Price Since 2020

EIA price data, US average price, chart by Mish

Those prices are monthly averages and do not reflect what’s been happening in October.

 AAA Gas Prices 

  • According to the AAA the price of diesel is currently $5.326, up from the September average of $4.99.
  • A week ago, diesel was $5.284. 
  • Diesel peaked at $5.816 on 6/19/22.
  • Gasoline peaked at $5.016 on 6/14/22.
  • The current price of gasoline is $3.793.

From the Peak Until Today

  • From the peak until today, the price of gasoline declined 24.4 percent from $5.016  to $3.793.
  • From the peak until today, the price of diesel declined 8.4 percent from $5.816 to $5.326. 

The price of diesel is currently rising putting still more stress on the trucking industry.

https://twitter.com/FreightAlley/status/1584638779276480512https://twitter.com/FreightAlley/status/1584640529794756608

Ocean Shipping Costs Decline 84 Percent, Truckers on Verge of Losing Money

The period between Labor Day and Christmas is typically peak shipping season. Don’t expect much of a peak this year.

For discussion, please see Ocean Shipping Costs Decline 84 Percent, Truckers on Verge of Losing Money

This post originated at MishTalk.Com

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Tony Bennett
Tony Bennett
1 year ago
“even the largest carriers stop focusing on specific lanes and just take everything they can get their hands on – just to ensure they can retain their drivers. This is when the “bottom” falls out of the spot mkt.”
…
I placed an order yesterday from vendor warehouse (about 300 miles away) which needed to be shipped freight. I asked any idea of when I could expect (hoped not much more than a week). Response: Truck will be here tomorrow (today) and you will get by Thursday.
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Tony Bennett
Tony Bennett
1 year ago
“the Lowest Since 2008”
…
Sure. We are in a recession just like 2008.
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MarkraD
MarkraD
1 year ago
Reply to  Tony Bennett
Yes, put every dime you have in puts.
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BDR45
BDR45
1 year ago
Reply to  MarkraD
What companies or etf’s are you purchasing puts in? Thanks..
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KidHorn
KidHorn
1 year ago
We have 25 days of supply, but I assume the fuel isn’t evenly distributed in relation to need. So, there will likely be shortages in some areas long before 25 days. And some areas will likely have fuel long after 25 days.
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MPO45
MPO45
1 year ago
Reply to  KidHorn
Sounds like rationing….I recall somebody around here saying that rationing would become vogue around winter for energy and food rationing next year…but I’m not one to gossip.
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Ron Cataldi
Ron Cataldi
1 year ago

The high level of distillates supplied contradicts what we’ve been told about the state of the transport industry… I thought business was collapsing, so why is demand so high for these fuels?

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Tony Bennett
Tony Bennett
1 year ago
Reply to  Ron Cataldi
No contradiction.
Bloomberg (and Mish) ignoring that US exports (negative net importer) of Petroleum products (diesel included) has grown steadily.
More than likely due to weak US demand … ie why trucking in free fall. Less demand domestically. Less supply domestically.
click on history at bottom for net imports “products”
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PapaDave
PapaDave
1 year ago
And in Europe; with unusually mild weather for a few more weeks, and the scramble to build natural gas reserves in advance of winter; there is now a surplus of gas in ships waiting to offload LNG. Because there is no where to put it. So natgas prices are plunging. Similar to what happened to oil prices in 2020. Maybe they will go negative for a couple of days!
Of course, once cold weather hits, demand will zoom and the oversupply problem will quickly end.
You can’t make this stuff up. But it shows that the system is struggling to stay in balance. More storage facilities in the future will alleviate this type of problem.
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TexasTim65
TexasTim65
1 year ago
Reply to  PapaDave
As you yourself have noted many times, good luck building more storage facilities given Europe wants to get off fossil fuels.
Europe is going to have to learn to live with wild swings in prices. If your lucky enough to have a home tank (eg propane or oil) it will be important to fill at the right time when prices are low.
Note that the OilPrice website is now saying that Natural Gas has indeed gone negative.
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StukiMoi
StukiMoi
1 year ago
Reply to  TexasTim65
The general prepper mindset of multilayered buffering, including sizeable buffers right at the endpoint; where the end user have “full” control; is very sound. Anyone who has ever been involved in designing systems which need to have high uptime recognises that (related: The sheer and utter impact of the refrigerator on wealth; is hard to overstate….)
More fundamentally: Good systems are simple, rigid and universal, hence predictable and reliable; at the core. With increasing flexibility the further you go out the branches. For those either awake and sentient, or who wishes to become so: Exactly the opposite of what results from a big central government promising to micromanage, take care of, and hold accountable every remote branch; under the false pretext, and illusion, of making things slightly less inconvenient for end-“voters.” All you end up with, is fragility. And dependence, hence vulnerability, to the central hegemon.
I don’t have statistics, but anecdotally: Western Europe appears to be the worst of all offenders. Over there, there are lots of even non-overlapping cell towers without proper power backup solutions. Power is out; communication goes with it. With at most a tiny bit of never-tested battery delating the blackout. America may be decrepit wrt infrastructure in its own right; but AFAIK not that bad. And it’s not as if the Euros don’t realise it deep down: Hospitals do have diesel generators. They just seem to be a bit in lalaland wrt the ultimate reliability of infrastructures. Perhaps explaining wanting “electric” cars; fully dependent on always-up non-overlapping powerlines fed by always-on powerstations fed by non-overlapping gas pipes across oceans to Russia….. As well as the utter hassle of obtaining something as simple as an RO water filter.
More down to earth and pragmatic: RO filters (2+) in every household. Enough water to last across an ocean (2-3 months worth…). A few hundred liters of (predominantly, please per the firemarshal…..) diesel, with storage capacity for twice that. Bicycles. 125cc scooters (frugal as heck). Small car. Truck if needed. Food for a month. Medications/first aid ditto. Guns and Ammo. Locks. Alarms. Sensors. Various sundry…. IOW: A few months in full and complete lockdown, with nuclear armed mean Putins lurking outside your door ready to pounce; results in little more than perhaps some boredom. Also: If it gets really bad: Enough cash/Gold/Coin, and perhaps guns/ammo….., to get to a better continent, if need be.
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MarkraD
MarkraD
1 year ago
Reply to  PapaDave
That’s what I’ve been saying, the natural gas “crisis” has been getting a lot of pumping by certain outlets that seem to have an agenda, a sort of global pump n’ dump scheme mixed with political scare tactic.
That said, U.S. nat gas exports are here to stay, Cheniere is a great long term bet IMO.
.
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JeffD
JeffD
1 year ago
The fact that a pickup truck costs more than a big rig is just ridiculous.
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StukiMoi
StukiMoi
1 year ago
Reply to  JeffD
It’s for exactly the same reason that a shack in some places, can cost more than a hotel in many others, despite the latter invariably being much costlier to manufacture:
In totalitarian states; the prices of goods are more a function of the whims of the junta, than of underlying economic calculations.
Hence: Junta-members wants to facilitate wealth being redistributed their way; by arbitrarily putting in place rules and policies and institutions which transfers wealth to them simply as a result of them “owning” some decaying shack in a Junta-fashionable neighborhood. But of course; the wealth has to be taken from somewhere. The tooth-fairy can only do so much. That somewhere then being, among other areas, from those building operating and staying in hotels in less Junta-fashionable places.
Ditto: Junta members and connecteds fly private planes. And drive limos. They don’t drive pickups. So, “laws” are arbitrarily made up which increases the cost of pickups. But: The Junta does need big rigs to haul the loot they have stolen from the rest; back to their “properties.” So: It’s “important” that price of those are “competitive.”
It’s also the same reason “we” need seasonal farm labor from Mexico, since paying Americans would be too expensive. Yet “we” don’t need, seasonal nor otherwise, medical labor (doctors, nurses, technicians) from the Philippines nor India, despite American doctors no doubt being much being much more expensive than even those “expensive” American farm labourers…..
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Zardoz
Zardoz
1 year ago
Reply to  StukiMoi
Toot toot! Kook alert!
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RonJ
RonJ
1 year ago
Reply to  Zardoz
Thanks for announcing yourself.
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Avery
Avery
1 year ago
Reply to  Zardoz
Don’t feel bad. It takes all kinds to make a world and we’re here to support you!
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StukiMoi
StukiMoi
1 year ago
Reply to  Zardoz
Not sure exactly who; although it may have been Alan Kay; it was who first extended the traditional saying “in the world of the blind, the one eyed man is king”, to also include “while the two eyed man is viewed as plain crazy…”
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Tony Bennett
Tony Bennett
1 year ago
Reply to  StukiMoi
I always enjoy your comments.
Keep them coming.
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Captain Ahab
Captain Ahab
1 year ago
Reply to  StukiMoi
No Junta, we have a free-market, don’t you know. FYI, Ford’s Hillbilly Model 45 Truck is already in pre-production. Inspired by the TV Show from the 1960s, it is priced for the Biden Depression. Powered for a maximum 45 mph at 45mpg, it seats four in the cab and three more on the roof, leaving the rear for worldly belongings, or a do-it-yourself van conversion.
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KidHorn
KidHorn
1 year ago
Reply to  JeffD
I think imported pickups pay a huge tariff, so ford/chevy/ram can charge a lot more and not have to worry about competing with cheap imports.
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MPO45
MPO45
1 year ago
Mish,
Can we get an update on the view from this post? It’s not the end of the year yet but we’re almost there.
I am looking for an entry point on TLT and still waiting for something to break.
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JeffD
JeffD
1 year ago
Reply to  MPO45
Why not buy individual bonds directly through treasurydirect.gov or your broker? You will get a better return than holding TLT.
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MPO45
MPO45
1 year ago
Reply to  JeffD
Sigh……..I don’t even know where to begin with your comment. TLT is down 30% YTD. Do you know why? TLT sells off as interest rates rise. At some point, interest rates won’t rise and they will reverse and go back down. Do you know what will happen with TLT when interest rates fall? How much do you think TLT might go up? There is a hint in this comment.
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MarkraD
MarkraD
1 year ago
Reply to  MPO45
That’s what treasuries do, the difference being that treasury etf’s extract fees and TLT pays a lower yield than an actual 20 year.
TLT is a good buy if you think yields are about to drop and want to capitalize on short term price movement.
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MPO45
MPO45
1 year ago
Reply to  MarkraD
I have a ton of money parked in T-Bills, I buy 30k of 4-week, 8-week, and 13-week Tbills almost every week. I want to buy TLT because:
1. It will appreciate after we reach peak interest rates which I project will be sometime in 2023.
2. It trades options – I can buy/sell calls and puts to generate additional income.
3. It pays a dividend.
It meets my trifecta of dividends, appreciation and options income. T-bills have been awesome but good things only last so long. TLT spiked $2 today, i should have bought it yesterday. It will go DOWN when the Fed hikes next week and I will probably execute a buy/write or sell naked puts on it.
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MarkraD
MarkraD
1 year ago
Reply to  MPO45
Ah, ok, you’re hedging against actual T’s.
I did the inverse back in August 2020 with TBT for a 20% gain, if only I were clairvoyant I’d have stayed in it till now.
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JeffD
JeffD
1 year ago
Reply to  MPO45
So your answer is that you are an options trader, not actually buying TLT. That’s what I was looking for. Otherwise, no advantage.
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hmk
hmk
1 year ago
Reply to  MPO45
3 month treasuries bought direct from treasury or a broker are IMHO the safest place to park cash for now. Also may want to look at ibonds.
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vanderlyn
vanderlyn
1 year ago
seems inflationary and the opposite of a deflationary panic,depression, or recession. the world since the plague and printing and now jacking up rates has too many forces moving all which ways. anyone who thinks they have a handle on it, is fooling themselves. smells to me like post ww2 inflationary belt loosening episode of 1947 to 49. i hope i’m correct. either way the rates are going up……..which i prefer.
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FromBrussels2
FromBrussels2
1 year ago
Bbubu….but you DID promise you d not let your EU frends down if we lived up to your imposed criminal policy within the context of YOUR war against Russia….I mean, we did impose all possible, even impossible, sanctions on Russia didn t we ?, We were gullible idiots by renouncing cheap energy from our 100% reliable energy provider, weren t we ? Why did we even care about a utterly corrupt basket case named Ukraine, if it weren t for you, our great democratic ally, saviour of the world, exceptional nation, the fckn US of A ?
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Zardoz
Zardoz
1 year ago
Reply to  FromBrussels2
Toilet tantrums aren’t becoming, comrade! Leave your fancy Belgian toilet and help comrade Putin rebuild the glorious Soviet Union!
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KidHorn
KidHorn
1 year ago
Reply to  Zardoz
Nothing you post is funny.
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Captain Ahab
Captain Ahab
1 year ago
Reply to  Zardoz
Belgian bidet would be funny.
What you don’t seem to understand is there is propaganda on both sides. With president Cluster Fudge in control, nukes are not only possible, they are increasingly likely. Even democraps are beginning to realize the idiocy of the current administration.
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FromBrussels2
FromBrussels2
1 year ago
Reply to  Captain Ahab
we got a friend in common …. t schipperke…..if I remember well, ….it s you, innit ?
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FromBrussels2
FromBrussels2
1 year ago
Reply to  Zardoz
….buy some oil Papadave ….
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Billy
Billy
1 year ago
I love seeing how expensive gas is here in California when I drive by gas stations in my Tesla.
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FromBrussels2
FromBrussels2
1 year ago
Reply to  Billy
…Here in Europe loading up the Tesla is about as expensive as filling up a traditional combustion engine car , difference being I can drive at least a 1000 kms with one ‘load’ ….I must admit though I do not feel, morally superior like Tesla drivers do in their poisonous batteries on wheels …..
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MarkraD
MarkraD
1 year ago
Reply to  Billy
How much does it cost per mile now?
I remember way back when Tesla’s first came out, circa 2008, it was estimated at .02, I’d guess maybe 2x that now….equivalent to tripling the mileage of a gasoline passenger vehicle.
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Tesla14
Tesla14
1 year ago
Reply to  MarkraD
I’m in CA and if I charge at night my Tesla Model S per miles cost is $.035/mile. I spend more on tires.
I plug in 1-2 times a week and in a few hours it’s juiced up. 9 year old car feels brand new. But I do not feel morally superior, I also drive a 13 MPG van (which has a ton of utility).
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Mary
Mary
1 year ago
Reply to  Tesla14
I find that interesting. I am currently paying 13 cents per KWH in Texas. A duck duck search tells me that the average cost in California is 30 cents per kWh. I charged my new Ford last week and did the math and it came out to $1.56 per gallon equivalent. Of course I did my own math and did not rely on the company sponsored app to calculate. I would be interested to know your conversion rate. It is half the cost of a petro gallon but it doesn’t take me far in Texas. I have a PHEV. It is fun to talk about but I don’t think it helps our plumbers, carpenters nor big rig truck drivers. The impact of diesel is felt at the grocery store. All parts of the food chain from planting to delivery require diesel
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KidHorn
KidHorn
1 year ago
Reply to  Mary
Either Tesla14 is full of it or mathematically challenged.
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Billy
Billy
1 year ago
Reply to  MarkraD
I just got back from Vegas and spent $92 round trip with a heavy foot. About 800miles or $.12/mile. That’s leaving my work at 80% charged.
Other than trips, I charge with solar at my work.
My daily driver was a 2008 F250 lifted diesel. With today’s prices I save about $500-600 per month.
I don’t feel like I’m morally superior. I just got lucky with the timing of everything. There is a superior feeling though when someone’s about to cut you off and in a split second of flooring it you are already in front of that guy. I swear the Roadster must feel like you are flying through time.
I strongly suggest trying one for yourself.
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spa sidechats
spa sidechats
1 year ago
Reply to  Billy
I love driving an older truck with roll up windows. Good condition, got on the cheap and reasonable gas in TX. I could afford a Tesla but why? It would be financially feeble minded. The only downside is family and neighbors needing to borrow it to haul stuff. One family member dented the bed pretty good but I told them not to worry about it. Repairs would cost more than the truck.
Oh, It also has free Sirius by default! I bought a lifetime membership almost 2 decades ago (not offered anymore). The truck surprisingly has bluetooth.
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PapaDave
PapaDave
1 year ago
I have been following this story for months. And have mentioned it a few times before. These are the four reasons for the shortage as outlined in the story below.
First, local diesel demand has recovered quicker than gasoline and jet-fuel from the impact of the pandemic, draining stocks.
Second, foreign demand is also strong, with American diesel exports running at unusually high level.
Third, and according to many, most important of all, the US also has lower refining capacity than before, reducing its capacity to make fuels.
Fourth is Russia’s invasion of Ukraine. The US was importing a significant amount of Russian fuel oil before the war, which its Gulf of Mexico-based refiners turned into diesel. The trade ended after the White House sanctioned Russian petroleum exports.
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MPO45
MPO45
1 year ago
Reply to  PapaDave
OMG PapaDave!
Why didn’t you tell us!?! Did you read the link to the article? It had this statement:
  • An ongoing diesel shortage would lead to higher trucking, farming and construction costs.
But the Fed is desperately trying to kill inflation! You mean rates could go even higher? Food costs higher? And oil higher! Stop “quiet profiting” and share the info! Any investment ideas?
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PapaDave
PapaDave
1 year ago
Reply to  MPO45
Lol! I have mentioned it a couple of times. Good for refiners, if you want to invest in them. Spreads are huge.
From a 42 gallon barrel of oil a refiner produces 19-20 galllons of gasoline and 11-12 gallons of diesel. There isn’t much wiggle room.
Sometimes there is so much demand for diesel that refiners make as much as they can and as a result end up overproducing gasoline. Which causes gasoline prices to drop. Like they are right now.
Its always more complicated than people think.
Some people think that gasoline prices are down because of SPR releases, or because of demand destruction. And I wouldn’t disagree that those two things are part of the story. But with refiners producing as much high profit diesel as they can, they are adding more supply of gasoline at the same time, and forcing gasoline prices down.
In the long run picture, there isn’t enough refining capacity in the US, or elsewhere in the world right now to meet all our demands. Though there are some new refineries being built in other countries which may help alleviate shortages of diesel. We will just have to import more of it.
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MarkraD
MarkraD
1 year ago
Reply to  PapaDave
“Sometimes there is so much demand for diesel that refiners make as much as they can and as a result end up overproducing gasoline. Which causes gasoline prices to drop. Like they are right now.”
I think you have it.
We use 400% more RBOB than diesel, it appears that refiners produce diesel more sporadically, I’d guess they try to project demand, which would explain the sharp spikes and drops in the supply chart above.
They may have underestimated diesel demand in light of Fed policy….which would synch with your rationale on currently lower RBOB.
Also, it looks like Chevron’s pressing the W/H for increased allowances on the license sanction bypass in Venezuela.
If it gets to a point where oil prices surge again to this Spring/Summer’s level, it could come down to a choice of lesser evils.
I’m thinking CVX might be an interesting play, they’d benefit all around, maybe not so much in the short term, but, if we need to mitigate the supply problem created with Russia ….the ball’s in Biden’s court.
Also, Musk just announced Tesla is going to produce an additional 20 million EV’s this month.
No, he didn’t.
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MarkraD
MarkraD
1 year ago
Both RBOB and diesel are made from the same oil, diesel’s less refining, but yields less per capita of oil.
I don’t see this as a crisis, at least not the way the headline presents it.
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MPO45
MPO45
1 year ago
Reply to  MarkraD
The market is forecasting something:
XOM – close $106.60 today
Nov 18 $110 strikes 1945 contracts
Dec 16 $115 strikes 1517 contracts
Jan 20 $115 strikes 1439 contracts
Jan 20 $120 strikes 1854 contracts
BP – close $31.80 today
Nov 18 $34 strikes 1215 contracts
Dec 16 $33 strikes 1090 contracts
Jan 20 $35 strikes 3662 contracts
Jan 20 $40 strikes 1574 contracts
I checked Chevron and it’s crickets. There is something about these two companies that is triggering the market. There were larger volumes on Friday so it’s not a one-time thing.
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MarkraD
MarkraD
1 year ago
Reply to  MPO45
Yes, of course, I’m sure they’ll be beneficiaries of refiners switching to diesel refining at higher prices.
I’m just not sure a diesel shortage is a crisis where refiners are the source problem, not oil, yet.
I checked those contracts after your earlier mention, the one big caveat to viewing options volume/open interest is not knowing if they’re a counter-position – commercial hedges, hedge funds, etc.
Someone earlier this month, oct 6th, took out a large number of VIX calls at 150 strike, while it’s likely we’ll see volatility, I won’t bet it gets to 150, it was likely a counter position to VIX puts or equity shorts that had already gained.
With energy, I’m watching the sector’s strength relative to the SPX and other sectors, I’m sure it goes higher, but it’s an alarm when any sector gets too high alone.
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MPO45
MPO45
1 year ago
As I said in another thread, there is a feeding frenzy of call options on XOM and BP for January 2023 and beyond. I’ve not seen anything like this which is why I keep referring to it. Today there appears to be a call spread on XOM at 1500 contracts at $115 which is ~$17.25m bet for Jan 2023. XOM closed at $106.
That’s too rich for even me so I did covered calls on some Canadian oil & gas stocks.
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Thetenyear
Thetenyear
1 year ago
Biden only needs 15 days supply to make it to the election! Nothing to see here.
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Six000mileyear
Six000mileyear
1 year ago
The chart for Retail Price of #2 Diesel shows an Elliott wave triangle between 2008 and 2020. This latest spike (Wave 5) should eventually fall below $2/gal.
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Webej
Webej
1 year ago
Voracious diesel demand will ramp up in Europe if they stop accepting Urals grade oil.
The US also relies on Russian imports for diesel.
Oil is not fungible. That’s why they’re trying to get Venezuela on board, the heavy crude is good for distillates.
US domestic pricing for natGas and distillates will be more and more competing against European demand, where they are paying 10× the normal price.
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TexasTim65
TexasTim65
1 year ago
Reply to  Webej
Problem with Venezuela is that the US is virtually the only country that can handle their heavy crude and refine it.
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JRM
JRM
1 year ago
Reply to  TexasTim65
Yep leave out China and Iran, where Venezuala has been shipping some of the oil for fuel!!!
And it seems the Biden admin doesn’t know that Venezuala and Iran are members of OPEC!!!!
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RonJ
RonJ
1 year ago
“National Economic Council Director Brian Deese told Bloomberg TV
Wednesday that that diesel inventories are “unacceptably low” and “all
options are on the table” to build supplies and reduce retail prices”
By the chart, it seems that in 2020, the lockdown did the trick, to build supplies. I don’t think that option is on the table this time, though.
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Crenvy
Crenvy
1 year ago
Reply to  RonJ
Don’t suppose Brian D. happened to mention those options right? 1) more green energy … Oh, yeah …
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Karlmarx
Karlmarx
1 year ago
Reply to  Crenvy
That would be “all” of the options that this administration would consider. I guess we have been exporting a lot to Ukraine
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Karlmarx
Karlmarx
1 year ago
Another reason why a railroad strike would be sooooo good for the economy.
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JRM
JRM
1 year ago
Reply to  Karlmarx
Which will drive Diesel even higher, since much of the diesel is shipped by train!!!
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Crenvy
Crenvy
1 year ago
Seems to have left out an answer to the obvious question … Why didn’t we run out of diesel in 2008? What’s different now?
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MPO45
MPO45
1 year ago
Reply to  Crenvy
For starters, we don’t have mass unemployment like in 2008 at least not yet. And since we don’t have mass unemployment that means people have money to spend on fuel and driving around to buy stuff.
Second, there has been no new capacity brought online and right now there are several refineries that have partially shut down for a variety of reasons and some have just flat out been shut down.
Third – oil supplies are tight with OPEC and Russia situation.
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