Diesel fuel causing crisis around the world, know why
No fuel is needed more than diesel to power the world’s economy. Trucks, buses, ships and trains run on diesel only. Apart from this, apart from construction, diesel is also used in agriculture. Diesel is also used to keep homes warm in countries with cold climates. And while natural gas prices are skyrocketing, diesel is being used as a substitute for gas, but a supply shortfall in the coming months is going to create a diesel crisis in every energy market in the world.
Diesel can be expensive!
The diesel crisis is expected to drive prices up sharply, which could cost homes more to keep warm. The increase in diesel prices in the US alone is estimated to put a financial burden of $100 billion on the US economy. US diesel and heating oil stocks are at four-decade lows.
There is also a shortage of stocks in northwestern Europe. The crisis may deepen after the implementation of economic sanctions on Russia in March 2023. Diesel crisis can be gauged from the fact that there is so much crisis of diesel in the global export market that poor countries like Pakistan are facing supply crisis for domestic needs.
Diesel prices in the benchmark New York Harbor spot market have already risen up to 50 per cent this year. Prices reached $4.90 a gallon in November, more than double what they were a year earlier. In northwestern Europe, diesel futures are $40 higher than Brent crude.
Why is there a shortage?
Refining capacity has declined worldwide. The issue of crude oil supply is also problematic but the difficulties increase when crude oil has to be refined into petrol and diesel. Refining companies closed some of their plants after the demand decreased during the Corona epidemic, which resulted in very low profits.
Since 2020, US refining capacity has been reduced by one million barrels per day. So in Europe, shipping disruptions and labor strikes have affected refining. Difficulties started increasing after the supply from Russia stopped. European countries are most dependent on diesel.
A ban on EU seaborne deliveries to Russia will come into effect in February, but the European economy could be adversely affected unless an alternative to supplies from Russia is found. Europe’s troubles may increase further due to cold. Europe is still importing diesel from Russia as well as countries like Saudi Arabia, India.