“It’s not just the fuel we put into pickups, tractors, combines,” said Chris Edgington, an Iowa corn farmer. “It’s a cost of transporting those goods to the farm, it’s a cost of transporting them away.”
At the start of the pandemic, diesel prices dropped steeply as the global economy slowed, factories shut down and stores closed. But beginning in early 2021 there was a sharp rebound as truck and rail traffic resumed. Prices, which increased pretty steadily last year, picked up momentum in January as Russia massed troops near Ukraine and then invaded. Low stockpiles of the fuel, particularly in Europe, have added to the price pressures.
“Diesel is the most sensitive, the most cyclical product in the oil industry,” said Hendrik Mahlkow, a researcher at the Kiel Institute for the World Economy in Germany who has studied commodity prices. “Rising prices will distribute through the whole value chain.”
Refineries, which turn crude oil into fuels that can be used in cars and trucks, have tried to play catch-up on both sides of the Atlantic in recent months. But they have not been able to make more diesel, gasoline and jet fuel fast enough. That is in part because refineries have closed in Europe and North America in recent years and more of the world’s fuels are being refined in Asia and the Middle East.
Since January 2019, refinery capacity has declined 5 percent in the United States and 6 percent in Europe, according to Turner, Mason Company, a consulting firm in Dallas.
Europe is particularly vulnerable because it relies on Russia for as much as 10 percent of its diesel. Europe’s own diesel production is also dependent on Russia, which is a big supplier of crude oil to the continent. Some analysts say Europe may have to begin rationing diesel as early as next month unless the shortage eases.
Article source: https://www.nytimes.com/2022/03/31/business/economy/diesel-economy-russia-ukraine.html
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