• As the government has been focused on crude oil and gasoline, diesel gas supplies have drastically fallen to dangerously low levels.
  • With diesel prices going up, it will cost more to transport consumer goods, which means that inflation won’t taper off anytime soon.
  • See list below for sectors and stocks most impacted by the shortage.

While a lot of attention has been directed toward the prices of crude oil, diesel gas suddenly appears scarce as we head into the winter months. The Energy Information Administration (EIA) has stated that the U.S. now only has 25 days’ worth of diesel supply left, which is a dangerously low level. The Russian invasion of Ukraine has drastically impacted global energy supplies as refinery closures and disruptions in the U.S. have recently caused issues with the supply of diesel gas at a time when demand is surging due to the changing seasons.

With diesel fuel and heating oil inventories running low, inflation will remain high for the foreseeable future. Since diesel is the primary fuel source for trucks, rails and vessels that transport most consumer goods, it’s looking like the prices of these transported goods will also increase.

What’s happening with Diesel right now?

Bloomberg reported that the U.S. diesel crisis is here and will spread across the East Coast, where there are transportation delays. Diesel inventories are at the lowest seasonal level ever, heading into winter. The Energy Information Administration (EIA) announced that U.S. distillate inventory (including heating oil and diesel fuel) had 106.2 million barrels in the week ending October 14, which is about 20% below the 5-year average and a 25-day supply.

There are colossal supply and demand issues with diesel fuel right now. Since diesel fuel is similar to heating oil, the demand will skyrocket as the northern hemisphere enters the winter months where people will need oil to heat their homes. Some speculate that if reserves aren’t built up by the end of November, there could be severe consequences — similar to the European energy crisis. The supply issues are being caused partly due to the embargo on Russian oil and because the refining capacity in the U.S. has dropped over the past few years.

The price of diesel hit a record high of $5.816 per gallon in June, and there’s a chance that it could go higher if we have a cold winter or if the European energy crisis gets worse — both of which are still undetermined as of the time of this writing.

Policymakers have been focusing on crude oil prices to fight inflation, but it appears that the diesel gas shortage could offset this. Goldman Sachs has warned that the government’s focus on fighting higher energy prices has only been on crude prices, even though that has little impact on what customers have to pay for. It’s also believed that refinery closures and disruptions are leading to this shortage of refined products like diesel gas.

What stocks are impacted by a diesel gas shortage?

A diesel gas shortage impacts many companies since the fuel is needed to transport goods across the country.

These are the industries most impacted by a diesel gas shortage:

  • Trucking and transportation. Since most of our goods are transported by diesel fuel, any company in this industry is facing the potential of low diesel supplies that could drive prices up.
  • Construction. Many power trucks and excavators use diesel, the increased cost of transporting raw materials, will drive home construction prices even higher when people already have to deal with soaring loan rates. This would also impact the mortgage industry since consumers will think twice about borrowing money, making everything more expensive.
  • Fresh produce. The prices of fresh produce will continue to increase as it’s becoming more costly to transport the goods promptly.
  • Other consumer goods. With all of our goods being transported by freight or truck, there could be issues with getting items into stores in time for the holiday season as we reach dangerously low levels of diesel.

It’s fair to say that stocks in any of these industries could be impacted by the diesel gas shortage if they can’t get the goods out on time or if they have to raise prices. Higher prices would only hurt consumer confidence as the threat of a recession looms large.

When we looked at stock market winners, we discovered that many oil companies were doing exceptionally well in 2022. We will be watching to see if limits are imposed on the export of U.S. oil and natural gas, as this would impact earnings.

What stocks are impacted by the diesel gas shortage?

Suncor Energy (SU)

Suncor produces synthetic crude from oil sands, a method that’s unlike conventional oil production. With diesel gas prices going up, Suncor stands to benefit as the stock is up almost 40% for 2022. Suncor has hiked up its dividend recently, making this an attractive stock for investors.

Valero Energy (VLO)

Valero is one of the top oil refineries as they manufacture and market transportation fuels. The company is also the second largest producer of renewable fuels, which means it will stay profitable if the world turns to renewable energy sources. Valero beat the earnings estimate for the third quarter, and the stock is up about 67% for 2022.

PBF Energy Inc. (PBF).

PBF is a petroleum refiner and supplier of transportation fuels, heating oils and other petroleum products. The company is working on producing renewable diesel by 2023 which would be a major game changer in this space. This stock is also up over 200% for the year while the rest of the market has continued to struggle.

Even though there’s a growing concern about switching over to cleaner energy sources, it’s important to note this transition won’t be quick.

What’s the impact of a diesel gas shortage?

While there has been plenty of buzz about the European energy crisis and the growth prospects of electric vehicles, we can’t ignore that diesel is the primary fuel source for power trucks, rails and vessels transporting consumer goods. If diesel prices skyrocket, then the prices of the goods transported will also increase accordingly. With the holiday season approaching, this would mean that we could expect further increases in prices.

Experts also worry that diesel prices could tip the economy into a recession. As the Fed continues to fight inflation by raising interest rates, other factors are causing diesel prices to go up, which would then impact the costs of everything that’s transported. This would mean prices would still go up and cause inflation to soar despite the aggressive rate hikes.

Diesel prices are going up right now due to simple supply and demand issues. There are also disruptions to the global markets being caused by the Russia-Ukraine conflict and the current lockdowns in China.

What’s next for diesel prices?

As the supply of diesel gas dwindles and the demand continues to surge, actions must be taken promptly. The Biden Administration has considered limiting fuel export to help with the supply and prices. President Biden recently announced that they would be releasing 15 million barrels of oil from the strategic reserve in December to increase the supply. However, there’s no clear indication this would solve, or substantively help, us with the diesel gas shortage.

It’s important to note that this fuel is used for heating and trucking, which is generally required to keep the economy going, especially in winter. Diesel keeps commerce and freight going because trucks, excavators, ships and freight trains need the energy source. If there’s a shortage of diesel, we would see higher costs for everything in the economy, from transportation to construction, at a time when the Fed continues its aggressive rate hike campaign.

What does this mean for investors?

With the stubborn inflation numbers causing stock market sell-offs as the Fed continues to raise rates to attempt to cool down the economy, it isn’t clear where to invest your money. With additional concerns of prices going up even higher due to a diesel gas shortage, there’s even more risk involved with investing in individual companies.

Many experts agree that soaring inflation will invariably worsen if fuel prices continue to rise. Although there has been a lot of attention on crude oil, diesel gas issues could hurt us as much or more. With Q.ai’s Inflation Kit, you could turn those inflation fears around with an Investment Kit that helps you profit from higher inflation. With our unique Portfolio Protection feature, you can protect yourself further against continued volatility and unforgiving downturns.

The bottom line

The diesel gas shortage could pose many challenges if the refineries don’t increase capacity or if we don’t find ways to replenish supplies. If diesel gas prices continue to go up, consumers will feel this impact as the prices of everything will continue to increase. We will continue to monitor the situation with diesel gas as it’s an urgent matter at this time.

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