With the tightening economic conditions, everyone is looking to cut back in any way they can, slashing budgets and finding places to trim expenses in the face of a feared recession or economic downturn. For a trucking company, though, there’s one budget item that is essentially uncontrollable, requiring fleet owners to simply grit their teeth and pay up as their business literally can’t run without it: fuel (diesel).
Diesel fuel is the lifeblood of any truck and truckers are stuck paying whatever they must for it as the business cannot run without it.
Which is why the current fuel trends, of rising prices and low supply, is concerning for any fleet operator.
According to online newsletter FreighWaves, that makes the recent results of the weekly Energy Information Administration statistical report concerning in at least major way.
As FreighWaves reports, the level of East Coast diesel inventories has been a key data point to determine if fuel supplies might increase or continue to remain at a chronic low.
The latest report was not encouraging on that front. According to the report, inventories of ultra low sulfur diesel in the region that the EIA calls PADD 1, which contains the key East Coast markets, declined to 19.375 million barrels from 20.4 million barrels a week before.
It was a surprising result after the previous week’s report mentioned supply was on the rise from earlier lows.
“I did not expect it,” Andrew Lebow of Commodity Research Group said of the decline. “The problem is on resupply, and it looks like the only way we’re going to resupply is to ramp up refinery capacity and production.”
Thankfully, the rest of the numbers in the EIA report were more encouraging.
National refineries are ramping up production, with total utilization at 93 percent, the highest level since the end of 2019. Current capacity is reaching more than 800,000 barrels a day.
As a result, total distillate production in the U.S., including diesel, was 5.137 million b/d. That is the highest since January 2020, when the winter heating blitz was still on. U.S. refineries produced 4.875 million b/d of ULSD, up from 4.69 million a week earlier. It was the highest number since August 2020.
This has also brought exportation of distillates to 1.124 million b/d from just over 1 million last week. However, that is still down from the range of 1.3 million to 1.5 million b/d it was running at a few weeks ago. The difficulty of dealing with European markets in turmoil has curtailed those numbers to some degree.
Overall, despite the initial bad news, things could be improving, as long as general conditions hold steady.
This is good news for fleet operators, as diesel costs continue to rise and put the crunch on carriers, particularly smaller fleets.
For more insight into these matters and others, Fleet Risk Solutions can help you make plans to deal with any number of crisis.
For more information on the current report and insights into its further revelations.
About the Author
Logan utilizes a holistic approach to assist trucking companies with growth, and survival in one of the most volatile times in our history. A strong risk management program is critical for every business, but trucking companies are extremely susceptible to breaks in the risk management process. Maintenance violations, driver violations, breakdowns, driver turnover, and the list goes on, all have a domino effect on each other, and the cost of operating a trucking company.