Which stocks are affected by a diesel shortage?

Key points to remember

  • As the government has focused on crude oil and gasoline, diesel supplies have fallen to dangerously low levels.
  • With rising diesel prices, it will cost more to transport consumer goods, which means that inflation is not going to come down any time soon.
  • See the list below for the sectors and stocks most affected by the shortage.

Although much attention has been paid to the crude oil price, diesel suddenly seems scarce as we head into the winter months. The Energy Information Administration (EIA) said the United States has only 25 days of diesel supply left, which is a dangerously low level. Russia’s invasion of Ukraine has had a huge impact on global energy supplies, as refinery shutdowns and disruptions in the United States have recently caused diesel supply problems at a time when demand is increasing in due to seasonal changes.

With diesel fuel and heating oil inventories low, inflation will remain elevated for the foreseeable future. Since diesel is the main source of fuel for the trucks, trains and ships that transport most consumer goods, it looks like the prices of these transported goods will also rise.

What’s going on with Diesel right now?

Bloomberg reported that the US diesel crisis is here and will spill over to the East Coast, where there are transportation delays. Diesel inventories are at the lowest seasonal level on record, heading into winter. The Energy Information Administration (EIA) reported that U.S. distillate inventories (including heating oil and diesel fuel) stood at 106.2 million barrels in the week ending October 14, or about 20 % less than 5 year average and 25 day supply.

There are massive diesel fuel supply and demand issues right now. Since diesel fuel is similar to fuel oil, demand will skyrocket as the northern hemisphere enters the winter months when people will need fuel oil to heat their homes. Some speculate that if reserves are not built up by the end of November, there could be serious consequences – similar to the European energy crisis. The supply problems are caused in part by the Russian oil embargo and because refining capacity in the United States has fallen in recent years.

The price of diesel hit a record high of $5,816 a gallon in June, and it’s possible it will rise if we have a cold winter or if the European energy crisis worsens – both still undetermined at this time. writing.

Policymakers have focused on crude oil prices to fight inflation, but it looks like the diesel shortage could offset that. Goldman Sachs has warned that the government has focused on tackling rising energy prices solely on crude prices, although this has little impact on what customers have to pay. Refinery shutdowns and disruptions are also believed to be driving this shortage of refined products like diesel.

Which stocks are impacted by a diesel shortage?

A shortage of diesel is affecting many businesses since fuel is needed to transport goods across the country.

Here are the industries most affected by a diesel shortage:

  • Trucking and transportation. Since most of our cargo is transported on diesel, any business in this industry faces the potential of low diesel supplies which could drive up prices.
  • Construction. Many electric trucks and diggers run on diesel, the rising cost of transporting raw materials will push up house building prices even further when people are already dealing with rising loan rates. It would also impact the mortgage industry as consumers will think twice before borrowing money, making everything more expensive.
  • Fresh products. Prices for fresh produce will continue to rise as it becomes more expensive to transport goods quickly.
  • Other consumer goods. Since all of our merchandise is transported by freight or truck, there could be issues getting items to stores in time for the holiday season as we reach dangerously low diesel levels.

It’s fair to say that stocks in any of these industries could be hit by the diesel shortage if they can’t deliver goods on time or have to raise prices. Higher prices would only hurt consumer confidence as the threat of a recession looms.

When we looked scholarship winnerswe found that many oil companies are doing exceptionally well in 2022. We will be watching to see if any limits are placed on the export of US oil and natural gas, as this would impact earnings.

Which stocks are impacted by the diesel shortage?

Suncor Energy (SU)

Suncor produces synthetic crude from the oil sands, a method unlike conventional oil production. With rising diesel prices, Suncor should benefit as the stock is up nearly 40% for 2022. Suncor recently increased its dividend, making it an attractive stock for investors.

Valero Energy (VLO)

Valero is one of the major oil refineries as it manufactures and markets transportation fuels. The company is also the second largest producer of renewable fuels, which means it will remain profitable if the world turns to renewable energy sources. Valero beat the earnings estimate for the third quarter and the stock is up about 67% for 2022.

PBF Energy Inc. (PBF).

PBF is a petroleum refiner and supplier of transportation fuels, heating oils and other petroleum products. The company is working on producing renewable diesel by 2023, which would be a game-changer in this space. This stock is also up more than 200% for the year as the rest of the market continued to struggle.

Although there are growing concerns about the transition to cleaner energy sourcesit is important to note that this transition will not be rapid.

What is the impact of a diesel shortage?

While much has been written about the European energy crisis and the growth prospects of electric vehicles, we cannot ignore that diesel is the main source of fuel for electric trucks, trains and ships transporting consumer goods. . If diesel prices skyrocket, the prices of transported goods will also rise accordingly. With the holiday season approaching, this would mean that further price increases could be expected.

Experts also fear that diesel prices could tip the economy into a recession. While the Fed continues to fight inflation by raising interest rates, other factors are pushing up diesel prices, which would then impact the costs of anything transported. This would mean that prices would rise further and inflation would soar despite the aggressive rate hikes.

Diesel prices are rising right now due to simple supply and demand issues. Global markets are also disrupted by the Russian-Ukrainian conflict and the current lockdowns in China.

What’s next for diesel prices?

As diesel supply dwindles and demand continues to rise, action must be taken quickly. The Biden administration has considered limiting fuel exports to help with supply and prices. President Biden recently announced that he would release 15 million barrels of oil from the strategic reserve in December to increase supply. However, there is no clear indication that this would substantially solve or help us with the diesel shortage.

It is important to note that this fuel is used for heating and trucking, which is generally necessary to maintain economy, especially in the winter. Diesel sustains commerce and freight because trucks, excavators, ships, and freight trains need this power source. If there were a shortage of diesel, we would see higher costs for everything in the economy, from transportation to construction, as the Fed continues its aggressive rate hike campaign.

What does this mean for investors?

With stubborn inflation numbers causing stock markets to sell off as the Fed continues to hike rates in an attempt to calm the economy, it’s unclear where to invest your money. With additional concerns about rising prices due to a diesel shortage, there is even more risk in investing in individual companies.

Many experts agree that soaring inflation will invariably get worse if fuel prices continue to rise. While there’s been a lot of attention on crude oil, diesel gas issues could hurt us just as much or more. With Q.ai inflation kit, you can reverse those inflation fears with an investment kit that helps you take advantage of higher inflation. With our unique Wallet Protection feature, you can further protect yourself against continued volatility and unforgiving downturns.

Conclusion

The diesel shortage could pose many challenges if refineries do not increase capacity or if we do not find ways to resupply. If diesel prices continue to rise, consumers will feel this impact because the prices of everything will continue to rise. We will continue to monitor the diesel situation as it is an urgent matter at this time.

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Edward N. Arrington