Why Is There A Diesel Fuel Shortage In 2022?

Posted - May 15, 2022
Diesel Fuel Shortage 2022

Nearly all Americans have been feeling the pinch at the pump, and truck drivers are no exception. While gasoline prices have been skyrocketing in recent months, US on-highway diesel fuel prices have also risen exponentially due to shortages.

What’s causing the diesel shortages, and what could this mean for truck drivers throughout the United States?

The East Coast Has a Reduced Oil Processing Capacity

The East Coast used to have over a dozen refineries, which was more than enough to handle the region’s oil processing requirements. However, in the past 15 years, that number has halved to a mere seven in operation.

Many closed during the 2008 recession, and several shut down more recently. One declared bankruptcy and subsequently burnt down, while another in Newfoundland closed its doors as recently as 2020.

While 1.64 million barrels of oil used to be processed daily, the current refineries can only produce a maximum of 818,000 barrels. The simple solution might be to open more refineries to address the 2022 diesel fuel shortage, but it’s not that straightforward.

Intense regulations have made it complicated to open any new refinery, which means it might not be financially viable in our current economic times to proceed with such a significant development.

Bringing Diesel Through the Colonial Pipeline is Financially Risky

Substantial diesel volumes come to the Northeast from the Gulf region via the Colonial Pipeline. Shortages are now being reported in the Northeast due to the financial risks associated with getting oil from Houston to New York City via the pipeline, a process that can take 18 days.

It’s classed as financially risky due to backwardation. This refers to market conditions where the spot price of diesel or another commodity is higher than its price in the future. Companies don’t want to risk sending a shipment of diesel only to find the per-gallon price has dropped in the time it takes to get to its destination.

As a result of the unwillingness of oil companies and refiners to take a hit on their bottom line, many regions are experiencing shortages and subsequent price hikes of more than 60% in just a few short months.

The Conflict in Ukraine

Wars can impact more than the countries directly involved in them, and we’re finding that out with the ongoing conflict between Russia and Ukraine. The demand for diesel in Europe has increased since they announced they would phase out Russian oil imports in 2022.

Europe was a net importer of diesel, consuming upwards of 6.8 million barrels daily. At least 600,000 of those barrels came from Russia. Now, crude exports to Europe from the United States are the highest they’ve been since 2016, with almost 49 million barrels exported in April alone.

COVID-19

The COVID-19 pandemic can be blamed for many things, and it has also been a contributing factor in our current fuel prices. Refineries on the East Coast had to scale back due to staffing issues, and it can take several months and up to a year to have them operating at pre-COVID levels.

How Are Truck Drivers Responding to the Diesel Fuel Shortages of 2022?

Truck drivers have many different options at their disposal in response to the rising diesel fuel prices. One of the predicted outcomes is that many owner-operator drivers will lease their services to a fleet or give up the self-employment lifestyle in favor of working for a company instead.

Some might try to ride out the wave and absorb the costs, even though fuel prices might see some drivers at risk of breaking even or experiencing losses. There’s also potential for drivers to negotiate fuel surcharge pass-throughs.

However, one option that some drivers might consider is exiting the business altogether, particularly as they contend with a combination of high diesel prices and shortages to make their jobs even more challenging.

Is It Time to Sell Your Truck?

Whether you’re tired of the fuel prices or believe now is the right time to divest your assets, discuss your options with TruckVin. We can provide you with a fast and fair cash offer for your truck and/or trailer that leaves you with cash in hand in a matter of days.