President Biden may force U.S. fuel suppliers to keep a minimum level of inventory in storage to guard against potential price spikes this winter, as diesel stockpiles in the Northeast have dropped to perilously low levels, Energy Secretary Jennifer Granholm told Bloomberg Tuesday.
While the U.S. remains a major exporter of diesel to European allies facing an energy crunch, "we also want to make sure there's enough fuel in the United States," Granholm told Bloomberg in an interview at the COP27 climate conference in Egypt.
Granholm's remarks are the most explicit yet that Biden is considering mandatory inventory requirements as U.S. East Coast distillates inventories, which include diesel and heating oil, are the lowest on record for this time of year, and stockpiles in New England are less than a third of normal levels.
But some analysts believe the move would backfire, as such a requirement would essentially sideline fuel supplies in the market today and divert them into tanks for safekeeping, in a shift that could create a demand surge in the short term and thus a spike in prices.
Before the U.S. banned Russian oil in March, it had been importing ~700K bbl/day of oil from the country, ~20% of which was already refined, but now it is competing with other international buyers looking to replace lost Russian supply.
On a global scale, the International Energy Agency said unprecedented diesel prices mean demand destruction for the fuel is probable.
"This increasingly ominous global outlook, along with very high prices, is set to significantly curtail diesel demand in 2023," the IEA said in its latest monthly report on the state of the oil market.