U.S. diesel supplies are dangerously low

Oct. 26 (UPI) -- While gasoline prices are a headline concern for the White House, the supply of diesel is becoming increasingly scarce and could be another source of pricing concerns for consumers, a main U.S. supplier said.

Fuel supplier Mansfield Energy, which delivers more than 3 billion gallons of fuel and associated products to its 8,000 customers across North America, said it now needs 72 hours notice to secure fuel and the appropriate freight "because conditions are rapidly devolving," according to the Bloomberg news agency.

Data published Wednesday by the U.S. Energy Information Administration, part of the Energy Department, show inventories of distillate fuel -- a category that includes diesel -- declined by 100,000 barrels during the week ending Oct. 14. That puts U.S. distillate storage levels at 20% below the five-year average for this time of year.

"At times, carriers are having to visit multiple terminals to find supply, which delays deliveries and strains local trucking capacity," Mansfield said.

As a result, Mansfield said prices could be running about 30 to 80 cents higher than the market average. Not only does the diesel issue present challenges ahead of the busy holiday shopping season, but it adds to the growing inflationary concerns that are building on the back of higher commodity prices.

The Energy Department, meanwhile, estimates there's only enough diesel available now to satisfy about 25 days worth of demand. Brian Deese, the director of the National Economic Council, told Bloomberg that supplies were dangerously low and the White House was using all of the tools at its disposal to address the issue.

President Joe Biden recently opted to tap deeper into the nation's strategic reserves of crude oil in response to a decision from the Organization of the Petroleum Exporting Countries to trim their production quotas. Deese said to address the diesel crunch, the Biden administration could lean on the 1 million barrels of diesel stored in reserves.

"We have looked very carefully at being prepared to deploy as and when necessary," he said.

The latest data show that U.S. refineries were operating at 89.5% of their full capacity last week and distillate fuel production actually increased by an average of 5 million barrels per day.

But the supply problem is particularly acute for the East Coast, which does not have the same dense network of refineries as other parts of the country. That makes the region dependent on pipelines.

Bloomberg reports that the Colonial pipeline, the main source of fuel supply for the region, is booked completely for the delivery of refined petroleum products such as diesel and jet fuel.

Those supplies, however, won't make it to end users until early November.