Prices for diesel fuel have soared by ~50% this year to $5.35/gallon, a record premium over gasoline and crude oil, according to The Wall Street Journal, illustrating how disruptions to globalized energy markets are producing price shocks and potential shortages.
The spread between diesel and gasoline has widened to an all-time high of $1.61/gallon from a mere $0.23 difference a year ago; the U.S. has only 25 days of diesel in reserve, the lowest since 2008, according to the Energy Information Administration.
High prices are hitting businesses from mining and manufacturers to distributors and retailers, who are paying record sums to transport goods; meanwhile, refiners are reaping record profits, and shares of Valero Energy (NYSE:VLO), Marathon Petroleum (NYSE:MPC) and Exxon Mobil (NYSE:XOM) have surged more than 80% YTD.
U.S. diesel inventories have trended down since summer 2020, and are now ~10% below their previous five-year low, but the figure is 40% in the northeast.
The current domestic diesel deficit is driven largely by exports, particularly to Europe, where it often fetches higher prices, and legal restrictions on the types of ships that can shuttle fuel between locations in the U.S. add costs that encourage selling overseas.
East Coast inventories of diesel and heating oil are currently at 25M barrels, and Macquarie strategist Vikas Dwivedi told WSJ that an average winter deplete them by ~20M barrels, but an especially cold winter "could easily draw down 23, 24, 25 million, and that's all you've got."
Such scary statistics are behind rising talk from the Biden administration of forcing limits on U.S. fuel exports.