Always Carry a Towel...
To wipe up the mess left behind from "Fact Checkers"
Diesel markets operate on a “just-in-time” basis – pipeline shipments arrive every few days, bringing enough supply to meet local demand in local markets such as Birmingham or Richmond. But a disruption forces markets to turn to inventory. US diesel markets tend to be comfortable and liquid when inventories are around 35-40 days; 30 days of supply begins to get tight. At 25 days of supply, there’s critically low fuel available when a crisis hits. Keep in mind, those inventories include products held at refineries and en route on the pipeline – so a large chunk of that supply is days or weeks away from the market where it will be consumed. - Diesel Crisis Continues – What 25 Days of Supply Means for Fleets by Alan Apthorp, 10/27/2022
Dooley truckers will line up for six hours or more outside refineries, and sometimes the supply runs out, Gosbee said. Because of safety restrictions on how many hours truckers can work in a day, distributors don’t have a lot of flexibility to send truckers to seek out other supplies when one refinery runs dry - Wyoming Faces Potential ‘Disaster’ As Diesel Supplies Evaporate by Kevin Killough, 10/28/2022
Part II of Fossil Fool is coming , hopefully before Tuesday’s midterm elections.. It’s been quite a rabbit hole to dive into with a deep dive into the energy crisis in the 1970s, mainly from the USA and whether price controls, rationing and other market interventions from governments were effective or not. In other words, it’s taken far longer than expected to write.
Anyways…
News has been going around for a few weeks now indicating that in the US, in particular the Northeast, diesel stocks are running dangerously low often written as having “25 days left of supply.” It makes for a catchy headline for sure! A casual reader may see such a headline, and depending on the context and their understanding of how the industry works believe that within 25 days from the release of such an article there will be no diesel.
Fortunately the Noble Fact Checkers at the never-ever-written-an-inflammatory-attention-grabbing-headline….eva corporate press outlet CBS News have informed us dear readers that such a thing isn’t true. In between the “These are the best places to retire in the US” and “Pumpkin spice foods cost up to 160% more than the regular version,” CBS reporter Megan Cerullo informs us of something actually important, “No, the US is not going to run out of diesel fuel in 25 days.” Lovely tone! Way to talk down to us plebs, eh? (To be fair to Ms. Cerullo, it’s usually editors who write the headlines, not the journalists themselves)
It’s also made its way to the top Google results, presumably organically, without any type of manipulation.
Irina Slav , who writes the excellent Substack Irina Slav on Energy pushes back a bit on some of the content in this fact check- especially the limitations of the analogies made in the piece. Analogies, while often useful, have their limitations. Failure to provide such context as to said limitation often runs the risk of making things more confusing or misleading for the reader. The CBS Fact Check ran into this exact issue.
Fortunately, Irina clears this up.
She points out the possibility of panic buying and hoarding too.
Two of the factors noted by the company as likely to cause a market imbalance — cold weather and holiday shopping — are only a matter of time as they are every year, and this time is shrinking; it’s already November. Panic buying may also be on the cards — a few more alarming reports and people will start hoarding.
Which brings us back to the upcoming Fossil Fool Part II piece.
There were two notable energy crises in the 1970s, one in 1973 and the other in 1979. For both, there were other factors leading up and contributing to the crises themselves but the gasoline on the fire (crappy pun intended) came from geopolitical events in the oil rich Middle East - one being the OPEC embargo against countries who supported Israel in the Yom-Kippur War, and the other being the Iranian Revolution which displaced the Shah.
One difference between the 1973 and 1979 crisis was that, at least in the US, the downstream effects such as the gasoline rationing, and long lines, were influenced more by panic buying and customer stockpiling (aka hoarding) than actual shortages. Whereas in 1973 they were more caused by actual shortages. The events leading up to and the actual Iranian Revolution itself did knock Iranian oil production off the global market, however that portion was a small fraction of global production unlike the 1973 crisis where supplies from several Middle Eastern countries were significantly reduced to the West.
We could of course face an entirely different shortage that regardless of diesel supplies would still put out entire economy to a halt. Such a thing would definitely not happen though. (/s)
This is definitely one to watch. Not buying the "don't worry" narrative at all.