Sirwin
Sirwin
What's going on with Diesel?

The Looming Diesel Fuel Shortage


I became aware a week ago that the USA, as of October 14, was about 25 days away from a catastrophic diesel fuel shortage. A week has since passed and while the story has gone mainstream, it appears the Biden admin are twiddling their thumbs over the issue. When a reporter asked the White House what are their plans to address the issue, the answer she got was, 'We'll get back to you on that'.

Here in Canada, we have a similar issue. At present, a liter of diesel is going for a whopping $2.37 in Ontario while regular unleaded gasoline is $1.77 per liter. Higher gas prices coupled with higher interest rates imposed recently by central banks literally guarantees a recession. The doubling of the price of diesel in the last 2 years is already translating into higher prices on just about everything we buy, from food to clothing to building materials. Transport trucks and farm equipment run on diesel and are the backbone of our economies. The higher fuel costs rise, the more expensive EVERYTHING will get (but inflation is only 8% they say...).

Reuters reported on Canadian diesel supply issue on October 17, providing an update that suppliers, including Suncor, Imperial Oil and Petro-Canada have all been undergoing maintenance and that supplies would remain tight for at least 'another two weeks before we see a return to a more stable diesel supply'.  It'll probably take another month or so after that before we see real stability.

Just to be clear, it's not some crazy conspiracy that these Canadian suppliers have shut down for maintenance in order to purposely affect the supply of diesel. They must do this every Fall to winterize their operations in Manitoba, Saskatchewan and in the tar sands of Alberta. Our winters can be brutal and it is absolutely crucial that they perform this maintenance.

Yet, the situation is so dire in the USA that even FOX News anchor Tucker Carlson brought it up in a segment on October 27, pointing out how the Biden admin cancelled oil and gas leases at home and sold a portion of the U.S.' strategic oil reserves.... to China! By the Monday of Thanksgiving week, there will be no more diesel. That means everything stops, trucks, trains, barges, farm equipment, diesel generators and so on.

Trucks, trains, farm equipment and barges are the backbone of our economies. Truck companies are dealing with the record price of diesel while the locomotive unions are battling it out with their employers for better pay and at the same time, the Mississippi River has gotten so low that barge traffic has come to a near halt. Most people have never given a second thought to barge traffic but is equally crucial as trucks and trains to moving stuff around, from grains to coal to iron ore. If all three main inland modes of transportation of goods comes to a halt, what happens then?

Will Canada come to the rescue and supply what diesel it can to the USA until things stabilize a bit? It might have to! Until then, be prepared for things to get worse before they get better. Stock up on food and other supplies and do your best to stay warm this coming winter.

Update (Nov. 2): Found a good article on the issue at oilprice.com titled 'The U.S. diesel shortage is worsening'.

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SweptOverNiagara
SweptOverNiagara

Name's Joe and I live in Ontario, Canada. I like writing on a wide variety of topics. I enjoy keeping track of markets, investing and commodities and the crypto sector. Also do some coding for web browsers.


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