(Bloomberg) -- The diesel crisis in the US may get worse this summer with the potential of shortages and rationing on the East Coast, said billionaire refinery and fuel station owner John Catsimatidis.
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“I wouldn’t be surprised to see diesel being rationed on the East Coast this summer,” Catsimatidis, CEO of United Refining Co., said in a phone interview. “Right now inventories are low and we may see a shortage in coming months.”
East Coast stockpiles of the fuel have fallen to the lowest in data going back to 1990. National inventories stand at the lowest in 17 years as the US has become the world’s diesel supplier of choice. Fuel markets have been in disarray since growing bans against Russian products restricted one of Europe’s main suppliers of energy. With exports draining US tanks, the East Coast is feeling the pinch most acutely due to a lack of sufficient fuelmaking capacity there.
Consumers are already feeling the squeeze. Diesel prices have risen for the past 16 straight days and hit a new record of $5.553 a gallon Tuesday, according to the American Automobile Association. Gasoline prices rose to a new record of $4.404 a gallon.
Fuel supplies are tight across the country after refineries mothballed plants during the pandemic when fuel demand was decimated by stay-at-home orders. The East Coast suffered a particular blow after Philadelphia Energy Solutions permanently closed its refinery, which supplied the entire East Coast, in 2019 following an explosion.
Companies are already working around the tight diesel market in order to keep trucks on the road. Pilot Flying J Inc., which operates a chain of truck stops, adopted a contingency plan to keep certain East Coast markets fully supplied, according to Brad Jenkins, senior vice president of supply and distribution. The company is “taking additional actions to secure extra supply and mobilize our fleet to deliver diesel to areas facing tight availability, such as Virginia and Georgia,” he said.
Gasoline inventories have also fallen as US refineries maximized diesel production this spring to meet the world’s sudden shortfall. However, Catsimatidis, whose company owns and operates 350 gas stations, doesn’t expect gasoline to be scarce, just very expensive.
“Drivers will pay the highest gasoline prices ever paid for Memorial Day,” Catsimatidis said. Travel during the holiday, he said, should surpass numbers seen last year.
(Updates with comment from Pilot Flying J in sixth paragraph.)
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