Inventories of diesel in the United States are the lowest they have been heading into winter in 70 years, unnerving a broad spectrum of consumers and businesses who share a concern about the possibility of extreme winter weather.
The U.S. Energy Information Administration (EIA) expects that low inventories of distillate fuels, which are primarily consumed as diesel fuel and heating oil, will lead to high prices through early 2023.
According to EIA, diesel prices will remain higher than $5 per gallon for the remainder of the year, and bills for homes that use heating oil will increase by 45 percent during this cold-weather season compared with last winter.
Since the onset of the global pandemic, the United States has lost more than 1 million barrels per day of oil refining capacity, with more expected to be shuttered in the next few years.
On March 11, 2020, the World Health Organization characterized the COVID-19 outbreak as a pandemic, and two days later, then-President Donald Trump declared a national emergency in the United States.
According to the EIA, at the beginning of the pandemic U.S. refiners had 19 million barrels per day (BPD) of operable refining capacity, the highest number ever reported by the agency. By December 2021, that number had dropped to 17.9 million BPD — a loss of 1.1 million BPD of capacity in less than two years.
Diesel is a workhorse of the economy, helping power most major industries.
Companies rely on it to deliver their goods by truck, rail and ship, and nearly 1 in 5 homes in the northeast use diesel for heat, but the burning of fossil fuels (oil, coal, and natural gas) may cause an environmental catastrophe exceeded only by the prospect of an all-out nuclear war.
Oil refineries across the country are being retired and converted to other uses as owners balk at making costly upgrades but America’s pivot away from fossil fuels has not resulted in adequate alternatives.
In the U.S., fossil fuels produce up to 80% of all energy that is consumed.
Nearly two months after President Joe Biden vowed “there will be consequences” for Saudi Arabia’s actions to cut oil production, the U.S. is not actively considering any significant retaliatory actions against the kingdom, and the “unprecedented” investments in solar energy the White House won with its spending bill would need to be replicated 10,000 times to replace sources of the nation’s current energy needs.
Laura Sanicola, who covers the oil & energy industry for Reuters, reported on nine refinery closures, most of them due to demand loss as a result of the Covid-19 pandemic.
PBF Energy shut most fuel units of its Paulsboro, New Jersey, plant in November 2020, citing low fuel demand during the coronavirus pandemic, but operations have restarted there.
Even with big earnings, when the profit margin on each barrel of oil processed has jumped from a dollar or two a year ago to as much as $18 today, investors don’t want to pour money into the environmentally destructive business. They are aware that rising concern about climate change could make refineries obsolete in the not-too-distant future.
“This is the lowest diesel inventory we’ve had at this time of year since 1951,” said Andrew Lipow, a Houston-based oil industry consultant. “It is quite concerning, considering demand is four times what it was back then.”
Four members of Congress sent a letter to Biden and the U.S. Department of Energy urging them to work with Congress to proactively address natural gas and diesel supply shortages in the Northeast and rising energy costs and develop a plan to prevent rolling blackouts should the region experience frigid temperatures this winter.
“Widespread reporting indicates that the Northeast may not have sufficient fuel supply in the event of severe cold weather this winter, and if last week’s frigid temperatures and major snowstorms are any indication, it will be a long, cold winter resulting in rolling blackouts across the region, leaving millions of families in the dark and cold,” said the letter, signed by Reps. Nicole Malliotakis (NY-11), Andrew Garbarino (NY-02), Jared Golden (ME-01) and Chris Pappas (NH-01).
“It is imperative that your Administration is working proactively with Congress to ensure that winter electricity reliability in the most densely populated area of the United States is available to meet the power demand necessary to avoid devastating consequences for the people and businesses across the region,” said the two Republicans and two Democrats.
Heating oil prices across the Northeast are at historical highs, exceeding $5 per gallon in Maine.
As oil companies post record-high profits, the shortage is being blamed on a lack of pipelines in the Northeast region, limited shipments of foreign-sourced LNG resulting from the war in Ukraine, the closure of coal, oil, and natural gas refineries,
Biden recently averted a looming rail strike that could have contributed to dire circumstances in the region by forcing workers to stay on the job without the sick time that they demanded in contract negotiations, but that steered the nation away from just one potential fuel disaster.
“Inventories are just one part of the supply equation for diesel and other distillates,” said EIA Administrator Joe DeCarolis. “The distillate fuels in storage aren’t the only source of diesel we have to keep trucks and trains moving, but lower-than-average storage levels will contribute to higher costs for diesel and for heating fuels through the winter.”
As the energy crunch drives record profits at American oil refineries, the owners of what had been the largest such facility in the Northeast have no regrets about tearing the place down.
Hilco Redevelopment Partners has been hauling out 950 miles of pipe from the former Philadelphia Energy Solutions refinery, abandoning the property’s 150-year history of processing crude oil into fuel in this city.
Once considered the largest oil refining complex on the East Coast, a massive fire broke out at about 4 a.m. on June 21, 2019, at the Philadelphia crude oil refinery, triggering several explosions and sending flames high into the sky.
While politicians argued about the imminent global warming disaster, they put off the need to replace American oil refineries with renewable sources of power and ridiculed attempts to transition to a clean energy economy.
Now, citizens who allowed them to engage in these charades will find themselves out of options and stuck in the cold.
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