Diesel: The Underappreciated Lifeblood of Our Economy
With talk of possible diesel shortages making news this fall, it can’t be emphasized enough that the fuel is one of the most essential products in the world today. That might sound like hyperbole, but you don’t have to take the oil industry’s word for it.
According to the Biden administration’s Energy Information Administration, diesel engines power “most of the farm and construction equipment in the United States” and “help transport nearly all products people consume.” In other words – we can’t live without it. The undeniable necessity of the fuel is just one example of why the push to rapidly curtail U.S. petroleum production is so misguided. At worst, hundreds of millions would starve without diesel. At minimum, we would not be able to enjoy the vast array of modern products and conveniences we take for granted.
There are many reasons the United States’ transportation, healthcare, mining, construction and agricultural sectors use more than 46 billion gallons of diesel a year combined: it’s exceptionally energy-dense and reliable, and diesel engines are built to do the heavy-duty work that keeps America going.
Anyone who’s spent any time lately on our interstate highways or has had packages delivered to their doorstep can surely understand the importance of the fuel for use in over-the-road trucks alone. The U.S. Census Bureau’s Commodity Flow Survey shows that more than 71 percent of all goods shipped in the United States are transported by predominantly diesel-powered trucks, a figure that is only increasing.
What about the other 29 percent of goods shipped? Diesel also powers the freight trains, boats and barges that move products around the globe, accounting for the lions’ share of that remaining percentage.
Diesel-powered combines, tractors and other agricultural implements also make it possible to produce enough food to feed the world’s exploding population, while diesel-powered heavy equipment make the mining and construction that serve as the backbone of society possible. Hospitals also rely on backup diesel generators to provide continuous electricity even in the event of outages, literally saving lives.
But what about electrification? Won’t that make diesel fuel obsolete? Although electric passenger vehicles are becoming more common, our fleet of diesel-powered vehicles and equipment won’t be electrified any time soon. We need diesel. Lots of diesel. And we’re already seeing the consequences of allowing supply to wane.
U.S. diesel inventories have sunk to their lowest levels for this time of year on record. Although rumors that we are running out of diesel have been exaggerated, the supply-demand imbalance has driven prices well over $5 per gallon and prices are likely to soar even higher this winter. These elevated transportation costs for virtually all the products we consume will also likely continue to drive up the retail costs of these goods.
One of the primary reasons diesel prices have spiked is because U.S. refining capacity is down more than one million barrels per day from pre-Covid levels. Some refineries went out of business during the pandemic, while others succumbed to political and social pressure to focus on producing more “green” fuel alternatives. Most of the country’s 135 refineries are producing as much diesel as physically possible at the moment, but the fact remains that demand – driven by all of the diesel end-uses listed above – is outpacing their ability to supply the market. The loss of Russian barrels in response to Vladimir Putin’s invasion of Ukraine has only exacerbated this problem.
That’s why it’s imperative moving forward that we see a sincere bipartisan commitment to not only increase domestic oil production but up our refining capacity as well. That will require a shift in the hostile policies and contradictory rhetoric that has deliberately and successfully been aimed at discouraging investment. After all, the United States needs diesel fuel, along with a number of other essential petroleum products. Those who remain skeptical of those facts will likely learn the cold, hard facts this winter.