A diesel shortage south of the border could trickle to Canada causing price spikes along with an overall rise in prices, says Dan McTeague, president of Canadians for Affordable Energy, a senior petroleum analyst for GasBuddy.com, and an 18-year veteran of the House of Commons.
A diesel supply shortage has been gripping the United States of late, with the White House declaring on Oct. 23 that reserves are down to 25 days of supply.
In an interview with The Epoch Times, McTeague said that diesel demand is “extraordinarily strong and production is just not there.”
McTeague predicts that the further east you go on the continent, the worse the shortage will be, on top of an ongoing supply crunch. U.S. diesel supply shortages are critically low, he says, and Canadians are going to feel it.
“Diesel inventory is 45% below the median five-year average right now,” McTeague says, citing figures from the U.S. Energy Information Administration (EIA), which collects and analyzes energy information for the industry.
Even if oil prices trade above US$120 next year as industry analysts predict, factors all adding to the shrinking stockpiles are the anticipated cold, unpredictable winter plus a shortage of U.S. refineries, low inventory, and strikes at two refineries in France.
Demand Outpacing Supply
Patrick De Haan, who leads petroleum analysis at GasBuddy.com, said the numbers imply refiners have been “losing the battle of supply and demand,” and demand is outpacing supply.In 2019, the U.S. diesel supply dropped to an annual low of 26.5 days of supply.
Diesel is the fuel source facing the greatest threat, according to Amrita Sen, an analyst from Energy Aspects in the United States. Diesel supplies were just not replenished over the summer, Sen told Business Insider.
The EIA indicated on Oct. 21 that the United States had only a 25-day supply of reserve diesel. Diesel is used in transportation, construction, farming, and military operations. Meanwhile, demand for diesel is at an all-time high.
CNBC reported on Oct. 31 that reserves in the United States are lower than they have been since 1951.
McTeague says this is certainly going to be felt in Canada.
“It’s a serious problem. The minute we get cold weather, heating costs will rise. We have lost three U.S. plants, and we simply need more diesel production,” he says.
Mcteague also says gas prices of $2 per litre might be a reality in some parts of Canada by January 2023.
He also suggests carbon taxes set by the federal government are a major issue for affordability.
“Diesel is the world’s workforce, and as long as governments tax the living daylights out of fossil fuel production, with carbon taxes roughly 14 cents per litre on diesel, a short supply will mean higher prices for Canadians," says McTeague.
He predicts prices for diesel will remain at or above $2.50 per litre, with some parts of Canada seeing costs soar to $3 per litre.
“The price of diesel has more than doubled, and that cost has to be passed on to the consumer. It will inflate the price of everything else,” he said.
