Analyst says diesel supply shortage in southeastern states ‘could become more of a challenge’

(The Center Square) — A fuel supply and logistics company is warning about diesel shortages across the southeastern United States, issuing an alert on Friday about “rapidly devolving” conditions in North Carolina and six other states.

Mansfield moved to “Alert Level 4” to address market volatility, and “Code Red” in the Southeast, which means the company is now requesting 72-hour notice for deliveries when possible “to ensure fuel and freight can be secured at economical levels.”

The “Code Red” applies to Maryland, Virginia, North and South Carolina, Georgia, Alabama and Tennessee.

The company likened current conditions for diesel to May, when prices rose by $1 per gallon as supply dried up throughout the Southeast.

“Poor pipeline shipping economics and historically low diesel inventories are combining to cause shortages in various markets throughout the Southeast,” according to the alert. “These have been occurring sporadically, with areas like Tennessee seeing particularly acute challenges.”

“At times, carriers are having to visit multiple terminals to find supply, which delays deliveries and strains local trucking capacity,” the alert read.

The notice follows an October fuels report from the U.S. Energy Information Administration that showed diesel fuel inventories on the East Coast at 45% below the five year average.

Mansfield’s “Week in Review” newsletter for last week contends the nation’s diesel supply has fallen to 25 days over the last two weeks, well below the 35-40 days “that are typically more comfortable for fuel markets.”

“There simply isn’t enough refinery capacity in the world to produce enough diesel – especially during refinery turnaround season,” the newsletter read. “Fuel is tight right now, and winter will only bring higher demand.”

The tight supply, along with strikes in France that recently reduced refining capacity, means “markets are bracing for supply crunches in the coming months,” according to Mansfield.

Patrick De Haan, head of petroleum analysis for GasBuddy, a tech company that monitors fuel prices, agreed “there are some challenges behind the scenes that are certainly making the situation more challenging, things like a lack of refining capacity” due to COVID-19 and hurricanes.

“Stations that are not truck stops may have more of a challenge” securing fuel, he said.

But the 25-day supply estimate can be misleading, De Haan said, by suggesting the diesel supply is in crisis.

“That number will move around. It’s been as high as 40,” he said. “That’s not days of supply, it’s a calculation based on supply and demand right now.”

The current tight supply means “it’s a little bit more planning and a little more of a logistical challenge,” but things could change for better or worse, De Haan said, noting that a smaller New Jersey refinery shut down during COVID-19 recently reopened.

For folks who drive diesels, “it’s something to keep an eye on,” De Haan said. “It could become more of a challenge in the days ahead.”

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