Market economics and tight diesel fuel inventories may interrupt supply to East Coast markets, according to a Mansfield Energy report. Any supply slippage would lead to increases for diesel at the pumps, a fuel already costing an average $5.31 per gallon, according to AAA data.
Diesel fuel powers almost all of the tractor trailers that transport goods that keep the U.S. economy running. As diesel prices rise, goods shipped by trucks must pass the increased cost along to consumers in the form of higher prices. The big rigs use diesel because it is more efficient than gasoline and delivers more horsepower, which is needed to haul tons of goods up long hills.
“Poor pipeline shipping economics and historically low diesel inventories are combining to cause shortages in various markets throughout the Southeast,” the energy company said. “These have been occurring sporadically, with areas like Tennessee seeing particularly acute challenges.”
The energy company noted diesel prices rose by $1 per gallon, and Southeast supply dried up in May. Market volatility during the last few weeks has begun to echo challenges seen in April, the energy company explained.
“Like before, markets are now seeing extremely high prices in the Northeast along with supply outages along the Southeast,” Mansfield stated.
Mansfield designated the Southeast as Code Red and has requested 72 hours notice for customers scheduling deliveries to ensure fuel and freight are available at economical levels.
“In many areas, actual fuel prices are currently 30-80 cents higher than the posted market average, because supply is tight,” the energy company stated. “Usually the ‘low rack’ posters can sell many loads of fuel before running out of supply; now, they only have one or two loads. That means fuel suppliers have to pull from higher cost options, at a time when low-high spreads are much wider than normal.”
Mansfield added carriers have reported needing to visit several terminals in order to find diesel, which delays deliveries and strains local trucking capacity.
Scroll down to leave a comment and share your thoughts.