Enjoying inflation? And Supply Chain problems?

Diesel prices soaring beyond crude, gasoline — and likely to stay that way

The numbers are stark on how much diesel has risen relative to other benchmark oil prices in recent weeks. According to the Department of Energy’s Energy Information Administration (EIA), retail gasoline is up 26% from the start of the year — but diesel is up 42.8%.

While it’s easy to blame the Russia-Ukraine war, given the enormous role of Russia as a supplier of diesel, the reality is that the price of diesel compared to crude and gasoline began to increase well before Russia’s invasion.

The price that truckers pay at the pump always is determined primarily by the price of crude. But if the relationship between crude and diesel goes through structural changes that tack on another 10 to 15 cents a gallon to the spread, those gains are going to impact the retail price of diesel even if crude sits perfectly still.

Government mandates, world-wide;  and changes in allocation of oil due to shortages of Natural Gas in Europe which are increasing the demand for fuel oil to generate power.

In a separate five-point list, Verleger mentioned ongoing issues with the diesel market.

— The increased demand for low sulfur-diesel.

— A decline in Nigerian oil production, which is reducing supply of a key low-sulfur crude.

— “Limited desulfurization capacity.”

— The use of gasoil, a diesel-like product in Europe, to generate electricity because natural gas is so expensive.

— Sanctions against Russia, by governments or private companies, choking off a significant supply of diesel.

In discussing higher demand, Verleger cites an issue that was hot three years ago but disappeared from the front burner: the marine fuel regulation known as IMO2020. On Jan. 1 of 2020, it went into effect worldwide, mandating fuel for ships with much tighter sulfur specifications. (IMO stands for the International Maritime Organization, the global organization that established the rules.)

It was expected that molecules, which would otherwise be made into diesel, would be diverted to produce a fuel that complied with IMO2020. The fear and consensus in the market was that such a diversion would boost diesel prices.

Follow the link and read the whole thing.   It’s depressing.   As far as I can see, Green policies are driving half the problems, implemented by Liberal governments, world-wide.


About On the North River

Forty years toiled in the Tel-com industry, married for 36 years widowed at sixty-one. New girlfriend at sixty-five. Was a Tea Party supporter. Today a follower of the Last American President to be honestly elected, Donald J. Trump.
This entry was posted in 2022, Economy, Global Warming Hoax. Bookmark the permalink.

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