The media and politicians have their eyes riveted on the screens and the figures for the price of a barrel of oil and especially gasoline. Paradoxically, very few look towards the shortage of diesel which also comes in fuel oil (heating oil) and kerosene.
Of all petroleum derivatives, diesel has the greatest potential to derail our economy through its hegemony over transport (mobility and goods) as well as heating. After China, England is considering rationing and hoping to avoid panic buying at stations as well as filling up heating tanks.
A global crisis that began in 2021
Tensions over the availability of diesel date from before the war in Ukraine with very low stocks, particularly in China, the USA and Europe.
At the end of 2021, Beijing had introduced rationing for trucks with a limit of 100 liters per day.
Today, US stocks are at their lowest in 14 years. While very light shale oil is ideal for making plastic, it is not rich enough for diesel or kerosene.
On the side of Europe, with the Ukrainian war, it is an orphan of Russian diesel. Of the 1.4 million barrels per day of diesel imported by Brussels in 2019, half, or 685,000 barrels, came from Moscow and a large part of the balance came from refineries in Saudi Arabia with 285,000 barrels.
The icing on the cake, Europe not only imports diesel from Russia, but also processed petroleum products so that refineries can turn crude into diesel.
If it were necessary to add a layer, European refineries are struggling to distill diesel because of rising gas prices. In effect, the gas is used to generate hydrogen to remove sulfur from diesel. Under current conditions, the process is financially unprofitable.
Import Diesel?
The option would be to import lighter sulfur oil. But both Angola and Nigeria are unable to boost their extractions. To forget.
On the side of Saudi Arabia and to a lesser extent the United Arab Emirates, Venezuela and Iran (if the American embargo is lifted), overproduction is theoretically possible, but their oils are too loaded with sulphur. Back to square one.
There remains the option of importing pure sugar diesel. China and its refinery battalions have the capacity, but faced with the extent of the shortage, Beijing has reduced its exports and is keeping the precious liquid for its local use. Saudi Arabia and India are doing the same. Diesel might be worth gold!
Rationing?
Shell and Austria’s OMV AG have started to restrict their wholesale supplies. For its part, England anticipates a diesel rationing from April.
We can imagine such an adventure in France before the election of President Macron.
On the tanker side, everyone is aware of this risk but refuses to sound the alarm for fear of a rush on the service stations and orders to fill the tanks with fuel oil (heating oil).
Price development
Financially, the April contract on the Nymex rose 11¢, or 3.2%, to reach $3.598 a barrel of diesel and it might drop to $4.
In Switzerland, the price of heating oil exceeds 150 francs and 47% of homes use this fuel for heating.
We remember that in June 2021, the Swiss refused the CO2 Law.
One might read on the poster of the visionary opponents: To ban the heating with oil… absolutely out of the question.
