Diesel: Low US supply could impact Canada

Diesel: Low US supply could impact Canada

Diesel: Low US supply could impact Canada

Low diesel supplies in the United States could have spillover effects in higher prices here in Canada, experts predict.

The latest headlines in the American media last month pointed to an update from the US Energy Information Administration, which shows that the US had the week of October 21, 2022. 25.9 days supply of total distillate.

Oil analyst Dan McTeague, founder of, says the current shortage in the US has mostly affected the eastern United States, and is tied to the closure of two major refineries in the Philadelphia area and the one in Newfoundland.

“Those three plants are a significant piece of the puzzle in terms of supply. And as we know, demand is incredibly strong. Our strong post-Covid economy is looking for fuel,” he told by phone Wednesday. .

But according to experts, this does not mean that the supply of diesel will run out during that time, considering that other refineries are still working.

“It’s being added every day all the time, and of course it’s being taken away every day based on demand,” Ian Lee, an associate professor at Carleton University’s Sprott School of Business in Ottawa, told over the phone. interview on Wednesday.

He used the analogy of a bathtub, where the water drains down the drain but continues to flow from the faucet.

The degree of integration between the US and Canadian economies, however, means that we will likely feel the effects, including in transportation, agriculture and heating, which in turn could affect prices on store shelves.

“So the bottom line is … it suggests we’re not going to run out of diesel, but the scarcity is and will be fueling the price. high diesel prices” said Lee.

According to McTeague, now is the “calm before the storm” before winter and heating oil demand begin to rise, which would cause diesel prices to rise, given that both come from the same product.

“There’s likely to be a significant spike in diesel prices, which is also the fuel used for furnace oil and when the weather gets cold, all fuels … usually start to spike dramatically at this time of year. It’s almost spring,” he said.

Data compiled by Natural Resources Canada show the average diesel price rose above 200 cents per liter throughout the spring and summer, before falling to around 180 or 190 cents per liter in August and September.

In recent weeks, the average price has returned above 200 cents.

Supply and demand imbalance, partly attributed to Russia’s invasion of Ukraine and subsequent ban on Russian oil imports. Russia being the leading oil producing nation — as well as reductions in refining capacity in recent years as demand slumped during the COVID-19 pandemic have all contributed, Lee said.

Old, inefficient refineries that did not meet modern environmental standards have also been shut down, he said.

McTeague also noted that as early as 2020 the International Maritime Organization mandated the use of ultra-low sulfur diesel for containers, a type of diesel fuel that causes much lower levels of harmful emissions but is more expensive to produce.

“A lot has changed. Diesel is not what we’ve been led to believe it was for the last 30, 40, 50, 60 years. Fuel is really the workhorse of the global economy,” he said.

Meanwhile, building a new refinery requires a large amount of capital, with decades of unrealized investment that could be at risk as governments move forward with decarbonization policies.

“In the medium and long term, everyone understands that we will decarbonize, but we are not living in the medium and long term, we are living in the present,” he said.

“And today, there is a shortage of refinery capacity, which is feeding into those shortages.”

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