Diesel reserves are low, just not as low as last year
February 1, 2001
DON MILLS, Ont. - Just in case anyone needed reminding, this month marks an inauspicious anniversary in the history of the North American trucking industry.Of course, it was one year ago this month th...
FILL 'EM UP: The middle distillate inventory for the eastern U.S. still stood at only about 40.5 million barrels as of Dec. 15, 2000.(File photo)
DON MILLS, Ont. – Just in case anyone needed reminding, this month marks an inauspicious anniversary in the history of the North American trucking industry.
Of course, it was one year ago this month that a cold snap in the northeast U.S. exposed dangerously low inventory levels of middle distillate petroleum products, sending the market for both heating oil and diesel fuel soaring.
At the height of the crisis, diesel fuel was selling for as much as 88.9 cents per litre in Ontario, and cash-strapped independent truckers across the country howled in protest.
Although the price of fuel was back down to its normal (high) level within a few weeks, the fallout from last February’s fuel “crisis” reverberated throughout the rest of the year.
Well, twelve months have passed and the dead of winter is upon us again. Fuel is currently hovering around the 72-cents-per-litre mark, slightly higher than February 2000’s average price of 71 cents per litre. With the proper elements – high fuel prices and cold weather – in place, could the trucking industry see a repeat of last year’s problems?
One factor working against a repeat of the supply-and-demand crisis is the current state of middle distillate inventory levels. According to Ron Rosnak, a petroleum industry analyst with En-Pro International Inc. of Oshawa, Ont., refineries are currently running at 95 per cent of their designed capacity, instead of the usual 80 per cent, in an effort to ward off another heating oil/diesel fuel squeeze.
“In January of last year, the middle distillate inventory for the eastern U.S. stood at just over 36 million barrels, down from 65.5 million barrels in January of 1999,” Rosnak explains. “As of Dec. 15, 2000, the inventory level for the same region was 40.5 million barrels, compared to 56.1 million barrels on Dec. 15, 1999. Plus, the U.S. Petroleum Institute estimates there is currently about another nine million barrels that has been stockpiled by companies with storage facilities. So, as of December, inventories are about seven million barrels behind where they should be, instead of 30 million barrels behind like one year ago.”
Due to the huge demand for gasoline during the summer driving season, the petroleum producers were not able to convert production until the fall to address the heating oil and diesel fuel inventory problem. According to Bob Clapp, vice-president of the Ontario division of the Canadian Petroleum Producers Institute, the refineries have been “running flat-out” ever since.
“There is enough crude now and the inventories are coming back slowly, but we have had a fairly cold winter so far, right down to Florida,” Clapp says.
Clapp adds that the potential is still there for a cold snap to spike fuel prices temporarily, but it is less of a threat this year. In fact, he says, the two-million barrel heating oil reserve for the northeast set aside by outgoing U.S. President Bill Clinton in July of last year was created specifically to help avert temporary price spikes. “If we have a normal winter, we should be able to tough it out until the pressure is off in the spring,” Clapp says.
As for the stubbornly high diesel prices right now, Rosnak says they relate directly back to last year’s crisis.
“Gas is cheaper than diesel fuel right now because gas has returned to a normal supply-and-demand relationship,” Rosnak explains.
“Diesel fuel is still showing the stress of the inventory situation and anticipation among speculators about shortages during the heating season.”
To make matters worse, as Truck News was going to press, reports out of Kuwait indicated OPEC was set to announce a five per cent reduction in oil production to give the price a boost.
Are we ripe for another crisis? The experts say probably not, but it might be a good idea keep your fingers crossed. n