The Looming Diesel Shortage Says A lot About Our Future

It's time for some hard conversations.

Photo by Clyde Thomas on Unsplash

Economists are talking about a diesel shortage now. According to The Washington Post, “inventories of diesel…are the lowest they have been heading into winter in 70 years.” It’s got everyone jittery, from energy companies in New England to soybean farmers in the midwest. One utility firm is moving to code red in the southeast. They say “carriers are having to visit multiple terminals to find supply, which delays deliveries and strains local trucking capacity.”

It’s bad news for everyone.

The economy still runs on diesel.

Unfortunately, we need diesel for trucks, ships, farming, construction, and military vehicles. A lot of homes rely on diesel-based oil for heat. In Europe, it’s becoming a substitute for natural gas.

Some experts are trying to minimize the crisis. They say that while we only have 25 days of diesel in reserve, there’s more being produced every day. Sources like Yahoo News beg to differ, saying demand has gone so high that we’d burn through a million barrels of reserve diesel in six hours. We’ve gone through roughly half of our strategic petroleum reserves (SPR) this year. Biden says he plans to replenish it when prices drop, but that might not happen soon.

In short, we don’t have enough.

Utility companies are imploring Biden to declare an emergency, saying New England “will not have sufficient natural gas to meet power supply needs” in the case of a hard winter. According to Bloomberg, “Heating oil is already being rationed in the New York City area as the coldest months of the year approach—and diesel supplies essential to trucking are precariously low in the Northeast.” The entire region has ten days’ worth of heating oil reserves for emergencies. Politicians have already started asking for its release. They don’t want to be blamed for people freezing in their homes, like they did in Texas in 2021.

Boston is bracing for the worst. The CEO of one utility company is predicting blackouts in the event of storms. He wrote a letter to Biden saying they won’t “have sufficient natural gas to meet power supply needs… This represents a serious public health and safety threat.”

Supply chain wonks are saying inventories of both diesel and natural gas are so tight right now, even the slightest glitch could derail everything. It could upend the operation of farms, even store deliveries. According to Reuters, this problem won’t let up until the economy slows down. In other words, we need “tighter financial conditions in the United States and other major economies to reduce fuel consumption to more sustainable levels.”

So the only fix is a recession.

That’s great.

There’s a few reasons for the shortage.

The war in Ukraine explains a big part of the mess. Despite their optimistic outlook earlier this year, Europe hasn’t managed to replace Russian natural gas with renewable energy. They’re turning to coal and diesel to run their economy. Now the U.S. has started competing with them. Reuters describes it as a "battle for supplies amid acute shortages and soaring prices.” We’re essentially taking their diesel because we’re willing to pay more for it.

In short, it’s a bidding war.

The Ukraine war isn’t the only thing hurting our supply. Back in October, the Mississippi River dried up to the point that ships can’t pass. It was a major conduit of goods, including everything from grain and fertilizer to oil and coal. A single barge took 70 freight trucks off the road. Without the Mississippi, we’re having to use more trucks and more diesel to ship those same goods.

Oil companies set the stage for this problem by shutting down refineries, citing low demand during the pandemic.

Just over the last two years, they’ve shut down three major refineries that were producing several hundred thousand barrels a day.

It was pretty short-sighted.

They can’t just boot those refineries back up. They’ve been stripping them for spare parts. They’re not operational. Worse, there’s no plans to build any refineries in the U.S. It takes a long time to build a refinery. It’s expensive. It takes decades for a refinery to show a return on investment. They’re not willing to take on the cost, especially since we’re moving toward green energy.

The situation places countries like Saudi Arabia and Venezuela in control. OPEC has recently said they’re ready to “intervene” to lower oil prices. Maybe they’ll save the day, but not out of the kindness of their heart. In fact, they might be responding to recent talk of easing sanctions on Venezuela. Either way, I’m sure Biden just loves relying on adversaries to bail us out.

All of this puts us in a real bind.

We need a better plan.

Politicians have been talking about energy independence for decades now. Nothing has changed. It has only gotten worse. See, it’s not just about the immediate possibility of a diesel shortage. It’s about the long-term implications. They’re not good. On the one hand, we can’t afford to keep the economy on fossil fuels. On the other hand, we can’t afford to quit them.

Basically, we’re stuck.

Here’s the bottom line: The western world was relying on Russia to feed us fossil fuels as we built up our green energy grids. That would’ve included fleets of electric trucks and ships. That was our plan. We were taking our sweet time.

Unfortunately, the war derailed all of that.

Nobody can see a way out of this mess. The Biden administration has been threatening oil companies, telling them to stop exporting fuel and keep more diesel at home. According to Forbes, our own diesel producers are still shipping a million barrels a day overseas. As Robert Rapier writes, “companies are doing it because they can…Consumers may complain, but ultimately these companies are trying to make as much money as they can, and that means selling products to the highest bidders.” These companies aren’t going to play ball with Biden. It’s not clear if anyone has the guts to invoke wartime production to force them.

For them, it’s always money over people.

Even if our politicians did force oil companies to keep more supply here, there’s no telling what it would do to the global economy. Other countries might retaliate. Everyone wants oil. Nobody has enough alternative energy to fill the void. They’re going to get it from Russia, or they’re going to fight over what’s available. That’s only going to make things worse.

We kind of screwed up.

It’s true that we couldn’t just let Vladimir Putin take over Ukraine. That said, we needed a real long-term plan for an extended conflict. The Biden Administration really didn’t think this thing through. They waltzed in with sanctions, weapons deals, and bravado—that that’s about it. Everyone assumed this war would end quickly. Look at history. That seems to be what everyone always thinks at the beginning of a war, that it won’t last long. They’re always wrong.

There’s no such thing as a quick war.

Our demand for cheap energy keeps growing.

The public overestimates how far along we’ve come with renewable energy. In truth, solar and wind account for a fraction of our national grid, about 12 percent now. We were inching in the right direction, but not fast enough. The Lawrence Berkeley National Laboratory tells us there’s 1 terawatt of solar power utilities practically waiting in the wings for connection to grids. That’s not entirely true. A lot of these projects haven’t even been built yet.

Politicians and mainstream media have downplayed or completely ignored just how much we rely on fossil fuels to produce our renewable energy infrastructure. We still need gas and diesel to mine the metals and minerals that go into solar panels and wind turbines. We still need coal and fossil fuels to power the factories and vehicles that make and transport all that stuff. According to The Wall Street Journal, China is actually flooding the market with cheap solar panels and undermining our efforts. As the story says, “China’s surging and cheaper polysilicon production has harmed U.S. producers, forcing the shutdown of several factories that use power sources with lower carbon emissions than Chinese producers.” So while everyone in the west celebrates the cheap price of solar now, one of the big reasons it’s cheaper is Chinese coal and Russian natural gas.

It’s quite a pickle.

Regardless of what you think about all this on an ethical level, the logistics are clear. Our green future still depends on the continued supply of diesel and natural gas—not just in the U.S., but all around the world.

In fact, it’s not getting better.

According to a report by the IEA, global electricity demand went up by 5 percent in 2021, more than twice its usual 1.8 percent average. We didn’t even build enough renewable energy to cover that increase:

Based on current policy settings and economic trends, electricity generation from renewables – including hydropower, wind and solar PV – is on track to grow strongly around the world over the next two years – by 8% in 2021 and by more than 6% in 2022. But even with this strong growth, renewables will only be able to meet around half the projected increase in global electricity demand over those two years, according to the new IEA report.

Our energy demands are growing faster than we’re building wind and solar farms. We’re using fossil fuels to make up the difference. We’re using more each year—not less. That’s not sustainable. That’s not what we signed up for. There’s only one way forward, and that’s using less electricity.

That’s an unpopular idea, I know.

The IEA also says the war in Ukraine is speeding up our transition to green energy, that our fallback on fossil fuels is temporary, but even then we’re still not moving fast enough. There’s no denying we’d reach our goals faster and with a lot more certainty if we consumed less energy.

It’s a troubling sign that we’re now competing with each other for these dwindling resources, and that our only hope lies in refriending oil producers like Venezuela. If we barely have enough of our own fuel to get through this winter, then I don’t see how we build a renewable grid without sacrifices. I also don’t see how we avoid the worst possible futures when we’re only increasing our use of fossil fuels, and then adding renewable energy on top of it as a garnish.

Do you?

The war in Ukraine won’t be ending anytime soon. Oil companies may or may not stop exporting diesel. They’re probably not going to build more refineries. The Mississippi River isn’t going to magically refill. We can’t count on any of these situations getting better on their own.

None of it feels temporary.

If that weren’t enough, the price of polysilicon has tripled this year, and it’s causing utility giants to delay solar projects. The Inflation Reduction Act and its $369 billion for renewable energy might help, but the solar industry doesn’t expect that to make much of a difference for at least a few years. So while the war might be inspiring us to talk about accelerating our plans, that’s not translating into facts on the ground—just more hype and wishful thinking.

The geopolitics of our looming diesel crisis tells us we’re not on the right path. Replacing Russian oil with Venezuelan oil doesn’t solve the bigger problems. Frankly, it’s going to lead to the same bad place.

Nobody seems to want to think about downsizing our energy needs. They want to talk about where to get more oil. Meanwhile, we’re sacrificing an awful lot to let Taylor Swift and her friends fly around on private jets. We’re sacrificing an awful lot for these big militaries. We’re sacrificing an awful lot for these promises of endless green energy, built on the back of dirty diesel and coal. We’re certainly not weaning ourselves off oil. Every year, our energy demands only grow bigger, and our current renewables aren’t keeping pace.

We need to be having some hard conversations.

We’re not just burning fossil fuels anymore.

We’re burning our future.