This article was originally published by Tyler Durden at ZeroHedge.
While the world has been obsessively focused on crude oil and gasoline in recent weeks, we instead alerted readers to a far more dire scenario playing out in diesel, a source of energy which is absolutely critical in keeping the “just in time” world running on time.
As a reminder, here are some of the articles we have published on the topic in recent weeks, many even before the Ukraine war:
- Diesel Is The U.S. Economy’s Inflation Canary – Feb 8
- U.S. Diesel Stocks Set To Fall Critically Low – Feb 18
- China Asks State-Owned Refiners To Halt Gasoline, Diesel Exports – Mar 10
- Global Diesel Shortage Raises Risk Of Even Greater Oil Price Spike – Mar 12
Fast-forward to today, when our warning was echoed by the heads of one of the largest commodity trading houses and the biggest independent oil trader who were speaking at the FT Commodities Global Summit in Lausanne, Switzerland on Tuesday.
The corporate leaders estimated that as much as 3 million barrels of oil and its products a day could be lost from Russia as a result of sanctions, in line with previous estimates, and warned that global markets face a squeeze on diesel with Europe most at risk of a “systemic” shortage that could lead to fuel rationing.
“The thing that everybody’s concerned about will be diesel supplies. Europe imports about half of its diesel from Russia and about half of its diesel from the Middle East” said Russell Hardy, chief of Switzerland-based oil trader Vitol. “That systemic shortfall of diesel is there.”
Those imports mean that Russian supplies account for about 15% of Europe’s diesel consumption, according to the FT which carried their comments.
Hardy said the shift to more diesel consumption over gasoline in Europe had helped to create shortages of the fuel. He added that refineries could boost their diesel output in response to higher prices at the expense of other oil-derived products to shore up supply, but warned that rationing was a possibility.
Torbjorn Tornqvist, co-founder and chair of Geneva-headquartered Gunvor Group, added: “Diesel is not just a European problem; this is a global problem. It really is.”
Tornqvist also warned that European gas markets were no longer functioning properly as traders faced huge demands from banks for cash to cover hedging positions. “I think it’s broken. It really is,” he said. “I never thought that somebody could say ‘ah, gas has fallen below 100 per megawatt-hours is really cheap’.”
Gas futures linked to TTF, Europe’s wholesale gas price have swung from about €70 a megawatt-hour before Russia’s invasion of Ukraine to about €230 two weeks ago and then slid below €100 this week. Before May 2021, European gas prices were below €20 a megawatt-hour.
As noted last week, Europe’s largest energy traders called on governments and central banks to provide emergency liquidity support to keep gas and power markets functioning as sharp price moves triggered by the Ukraine crisis have strained commodity markets. Hardy said that to move a cargo equivalent to 1 megawatt-hour of liquefied natural gas priced at €97, traders must provide €80 in cash, straining their capital requirements.
Worse, confirming that Europe faces an even colder winter, Tornqvist said European utilities would struggle to fill gas storage for next winter given the “paralyzed” state of the spot market for gas unless policymakers stepped in to provide guarantees to protect buyers against price swings.
But going back to diesel, Bloomberg’s Javier Blas tweeted a handful of the scariest quotes from the energy CEOs at today’s FT commodities summit:
- Trafigura CEO Jeremy Weir: “The diesel market is extremely tight. It’s going to get tighter and will probably lead into stock-outs” referring to when fuel stations run dry.
- Gunvor CEO: “Europe is so short of diesel”
- Vitol CEO: “The thing that everybody’s concerned about will be diesel supplies”
Needless to say, without diesel, not only will traffic in Europe grind to a halt but much if not all US truck-based logistical support and supply chains will soon be paralyzed. The consequences for the global economy will be dire.
Euros elites are fine with returning the middle class to a state of impoverished peasantry.
The WEF Reset against the Enlightenment tradition that built the modern Western world continues.
I’ll probably get jumped on by all of the Biden communist supporters, but if I remember right Biden on the first or second day of his presidental term, he signed into law shutting down the keystone pipeline, and within a short period , he shut down other pipe lines and drilling. So every one of those communist Biden supporters that is pissing and moaning about the lack of gas , diesel and other oil products have themselves to blame. I cold say more, but I’ll get off of my soap box now.
Diesel (and other light-oil fuels such as kerosene) are simply a by-product of refining the oil down to gasoline. About 45% of refined oil results in gasoline, with about 30% of the refined oil resulting in diesel. If we run out of diesel, there won’t actually be much remaining gasoline available either.
Might not be a bad thing if it gets the Lefties to take a hard look at how the nation functions with a major cut in fossil fuel usage (just a cut, not the total elimination they call for).
I’m thinking they won’t like it much, but will they become realistic or use it as an excuse to call for more “green” energy?
I suppose it depends on how many of them are among the survivors and how many are not.
Oligarchs, illegal immigrants, refugees and other parasites that suck up government assistance don’t care about fuel shortages. The adults living with mom don’t care about anything but cannabis and adderal.
In 2022, the state considers food production a national security concern, telling too-big-to-fails how to put their right foot in front of their left.
In theory, any organic material — and there are some pretty vigorous, weedy plants in our deserts — could be fracked, as well as waste plastics, already composed of petrol distillates and stabilizer. So much food has been subsidized that wastes could feed the world, yet are rendered in plants that befoul the county.
It is the imaginary, bureaucratic hurdle of captured industries, leading to artificial scarcity. The commissars will continue to believe their status was somehow earned in material reality, until the land vomits them out.
typo —
cracked
My wife wanted to go somewhere really expensive to eat so I took her down to the Texaco.
Ha ha, ya. That will soon be very true!