I wasn’t even aware of the diesel shortage until I was alarmed by back-up White House paid liar John Kirby—he’s the competent one— was asked about it and he huminahumina-ed “I’ll have to get back to you on that.” This means, “Hey! That’s am embarrassing question; you’re supposed to be covering for us here, not causing trouble!” Then Tucker Carlson took up the topic as his scare of the day, but since I don’t trust him, I didn’t listen to it. Yes, I should have posted on the issue then: like so many of the current government fiascos, this one is about, most prominently, competence. The perils of running out of diesel fuel implicates at least four Cabinet Departments: Energy, Commerce, Transportation and Homeland Security. It is a big topic, and fortunately, a conscientious commenter, Sarah B., has done the research and analysis that I should have done.
Here is Sarah’s essential Comment of the Day regarding the diesel fuel problem, from the most recent Ethics Alarms open forum.
I think we should talk about a topic near and dear to my heart: the looming crisis caused by the diesel shortage in our nation. I will say right out that I do not have a solution to this crisis, but instead, I want to discuss how we got here, and the issues that stand in the way of fixing it. Getting here was an ethical failure on many levels, most of which can be laid without much hesitation at the feet of our current President and his party, but not to the exclusion of Trump, Obama, Bush, Clinton, etc. I know this is long, but I’d love to start communication on this issue.
The first thing to know about the diesel shortage is that it isn’t just diesel. In refining terms, the shortage is of all distillates. Light and medium distillates include kerosene, heating oil, jet fuel, aviation fuel, and diesel. Each of these are competing products from similar oil breakdowns, so a shortage of one results in a shortage of all. Many of these products seem as though they are the same thing with different names, and to an extent they are. But the government regulates and licenses each one slightly differently with slightly different specifications on each product, so aviation fuel and jet fuel can both run an airplane, but depending on the airplane, one is legal, the other isn’t. The point, however, is that the diesel shortage extends beyond what we typically recognize as diesel usage.
What is the extent of this problem? Some sites note that we have a 25.9-day supply of diesel, which is the lowest point we’ve been, comparatively, in a very long time. Generally speaking we tend to want to run at about 35-40 days. More specifically, the diesel supply is at the lowest point this nation has ever seen coming into winter. Some pundits argue that we are fine, that we’ve seen years with similar shortages, but they are being either ignorant or disingenuous. The shortages they cite occurred in April of their respective years, such as 1925. April shortages are a different beast than October and November shortages. April is at the far end of the cold season; October is at the very beginning. April is at the tail end of most major southern refinery turnaround season, whereas October is just entering into turnaround season. In other words, a shortage in October is like have a food shortage right after harvest and going into the lean months, whereas a shortage in April is expected because we’ve just emerged from the lean months, but we expect new crops soon. And if the shortage is bad now, how bad will it be by April?
Fact checks say that this does not mean the US will run out of diesel in 25 (or 26 days) and I do want to comment on that. They are correct that we will not run out of diesel in 25.9 days. The number is the amount of diesel in storage that we have, should our diesel production stop entirely. That means that if all refineries stopped producing diesel tomorrow, we would run out in 25.9 days. Refineries are not going to stop, barring unforeseen events, so we are not 25.9 days from disaster. That number is not what this means, and Tucker Carlton is wrong to phrase it like that. It is true that this is not a time to panic. It is a time to get nervous however, and the fact checkers ignore the actual issue. The short supply is a lagging indicator that shows that we are having refined distillate supply issues. Should a major storm hit the gulf coast, it would devastate the US. Should the Rocky Mountain refineries have a slew of issues, the US will start hurting badly. Any hiccup will cause price spikes throughout the nation. This is just an indicator, but it is a very important one.
Why do we care about this shortage? For one, kerosene and heating oil are a major source of heat, especially in New England, as we come into the winter. A lack of heating oil will increase the costs of heating homes, and if it gets too low, some houses will have to go without heat, many in bitter and deadly cold. In addition, the increase in costs will make it even harder when the official inflation numbers are around 8-9% and grocery bills are close to 40% higher.
A second concern is the supply of jet and aviation fuel. Airlines will have to pare back flights, and since a certain amount of shipping occurs by air, this impacts a supply chain that is not yet recovered.
But by far the greatest impact comes from diesel, and that is why we are finally starting to hear about this, albeit in a limited manner. Not a single thing shows up on your dinner table without diesel, unless you grow it all yourself. Farmers use diesel powered equipment, most especially at this time of year when harvests are still coming in. Without that equipment, harvest will be greatly abbreviated. Sure, a horse or ox can pull some equipment, but most equipment isn’t designed for animal power anymore, and the speed just can’t compare. The result? Crops left in the field, spoiled. As we are already seeing shortages on the shelves, as shown by some of the ugly price increases, this will only exacerbate the cost of food.
Now, the trucks moving freight across the nation use diesel. If we want to supplant those trucks, in the long term we could try to increase electric rail. Maybe. The idea is that rail can move more freight, but that isn’t a simple or quick solution. Railways have to be expanded. Electricity needs to be supplied so those electric trains can run. Unfortunately, most engines use…diesel! In reality, large electric rail improvements are very unlikely, requiring huge capital expenditures and a significant amount of eminent domain. But what do we have for short term solutions? Gasoline powered engines don’t have the towing power (torque) to keep up with diesel engines. Electric vehicles get extremely poor mileage carrying cargo, much less huge heavy trailers. Ships can only go where there are sufficient water ways. A larger fleet of smaller vehicles creates massive logjams at our distribution centers. All this adds up to a crippling blow to the supply chain.
Many work trucks in many industries use diesel. Again, electric and gasoline vehicles just don’t have the torque to pull this off. This means less trailers and less in them. The industries relying on these vehicles are going to fall behind, again worsening the supply chain issues. Of course, as food availability goes down, manufacturing goes down, and transportation of goods slows down, costs are going to skyrocket. So, going into winter, people are going to struggle to heat their homes, feed their families, make improvements on their houses to make them more winter-capable, and top of that everything will continue to grow more and more expensive.
Ok, so we have established what we are lacking and why we care. Next, we need to understand why we are here. So, why are we here? Every single pundit out there has an idea of this, ranging from greedy oil to stupid politicians. In my opinion, we are in this position for a variety of factors, greatest of which is the rampant belief that anthropogenic global climate change (AGCC) is a problem which we need to fix.
For years now, the AGCC alarmists has made it almost impossible to get permits on new refineries. The expansion of a refinery is difficult, but to actually build a new one is a monumental struggle just for permitting. This has been made infinitely more difficult under hostile presidents like Obama and Biden, but even under Bush and Trump, a lighter regulatory hand is still far stronger on the scales than facts suggest is necessary. Permitting for a refinery is measured in years, not months, and while you might be able to make headway under one President, the next one is likely to shut down all the work you did in the last 4 or 8 years, and you are out millions of dollars. The only time that might have seen the current permitting process begin and complete under one president is that of FDR, and that is unlikely. A refinery would cost a fortune to build and would take over a decade to do so.
The EPA and federal government have a great money-making scheme in refineries. I will give two examples. First is that of Deepwater Horizon. All companies that drill in US waters in the Gulf of Mexico have to pay a legislated payment as insurance in case they have a spill. This payment to the government is meant to be put in a pool that, like insurance, should there be a spill, will pay for the vast majority of the damage and provide protection from lawsuits. However, when the Deepwater Horizon spill occurred, the federal government reneged on their assurances and BP had to pay far more than was previously stated, as well as being hit with several lawsuits. The government essentially had told the oil companies that if they complained too much, it would slaughter them in the court of public opinion before they ever came near a court of law.
Another scheme involves biofuels. A law was passed in 2008 requiring refineries to produce a certain percentage of “renewable” diesel or pay a fine. A market as also set up so that one refinery could pay another for renewable credits if the former did not produce enough but the latter produced more than required. These requirements and stipulated penalties were only to take effect after the technologies for making renewable diesel were available. However, as soon as one small lab on a college campus started making biodiesel at the rate of less than a gallon per day, the government immediately started slapping refineries with multimillion or even multibillion dollar fines. There was no ability to scale up this procedure at the time, but since someone somewhere made biodiesel, the government felt entitled to start aggressively enforcing these penalties. Years of legal action finally managed to mitigate some of the worst of the damages, but all that money wasted could have gone into refinery improvements, expanded capacity for real products, or even better equipment to meet yet other environmental regulations.
The stupid thing is that renewable diesel is not terribly environmentally friendly. Just like the boondoggle of ethanol has converted a huge amount of crop land into biofuel production, so renewable diesel requires a huge uptick in cropland (or untouched lands) to be converted to, say, soybean production. The process then of taking these crops and making them ready for processing into diesel is resource intensive and expensive. A barrel of renewable diesel can cost anywhere from twice to three times the cost of a barrel of conventional diesel. The lifecycle analysis does not show renewable diesel to be any friendlier to the environment than convention diesel. And yet, for the sake of combatting AGCC, or at least paying it lip-service, the government has pushed this agenda.
On the boarder sociopolitical scene, diesel itself gets a bad rap, labelled as a dirty fuel. The main difference between diesel and gasoline is that while gasoline is a hydrocarbon in the butane to octane range, preferably with a certain amount of branched chain or ringed structure, diesel is a hydrocarbon in the nonane to pentadecane range, preferably straight chain structures. It is less volatile, but easier to clog filters. There are less VOCs and it doesn’t light on fire nearly so easy. Yeah, there is a little more sulfur, but after all the regulations, almost none of that is in your car and instead has been turned into fertilizer for your garden beds. So, legislators tend to make more and more requirements on diesel production that makes it expensive to produce.
All this adds up to limited refining capacity. New refineries are too difficult to build. Existing refineries could expand capacity, but not when the government is bilking them with unreasonable fines and requiring ever greater overhead on environmental efforts. Don’t get me wrong – managing SOx and NOx emissions have been a great boon to the quality-of-life surrounding refineries, and for people in dense cities where great quantities of refined fuels are burned. But as the regulations continue to hit refining, the will, much less the ability, to expand capacity diminishes.
Even assuming refineries can magically expand capacity, there is also a problem of crude oil supply. Fracking has helped provide a large boost to the crude oil supply, but environmentalist have been death on fracking, and the federal government has often followed suit. Fracking isn’t actually a problem. The one “proven” fracking issue, in Pavillion WY, near where I grew up, came about because the EPA drillers messed up and put their own traceable chemical into the water source, not the company who used a similar tracking chemical, but not the one found. The reports were vague and horrifying until you get into reading about the exact chemical names and the vast majority of people tend to shut their brain off between the differences of (2S)-2-[[4-[(2-amino-4-oxo-1H-pteridine-6-yl) methylamino] benzoyl]amino pentanedioic acid and (2S)-2-[[4-[(2-amino-4-oxo-1H-pteridine-6-yl) ethylamino] benzoyl]amino pentanedioic acid. (One of these is a real chemical necessary for human life, one is made up for this example, but could exist). At some the eyes glaze over and you can hide the problem in a paper, not to mention that the difference of one atom or the placement (cis vs trans) of an R group can turn a chemical compound from necessary to life to toxic to life. The point is fracking could provide a great deal more oil, but the government keeps restricting it.
In other areas of supply, the Biden Administration most recently has actively hamstrung local drilling by refusing to hand out permits. This leaves us with wells that are drying up, requiring secondary and tertiary means of extraction to a higher degree, which are costly measures. The Biden Administration also cancelled the Keystone Pipeline that would have flooded the US with cheap Canadian tar sands crude. Yeah, the stuff is junk and difficult to refine, but at least would have been available. But the point is this. Expanded refining capacity means little if we don’t have oil to refine.
To be fair, Biden did give out a great many permits in 2021, but not only have they stopped, but just because you have a permit from a few years ago, doesn’t mean it is good. Biden claims that over 9000 permits are available and it is only the greed of oil companies that denies us oil from those drilling permits. That is false. Yes, over 9000 unused permits exist. However, companies have to pay money to get permits and it is cheaper to ask for many at a time, as well as some areas have statutes that require the companies to have a certain number of wells per a certain area before drilling is actually allowed. So if a company has a dozen permits for an area and drills the test hole and it comes up dry, the other 11 are unused. If an environmental agency puts a hold on a permit, it goes to court. There are over 2500 of those permits (better than 25%) in court right now. If the administration approved sites A, C, E, and G, but not B, D, and F, the company may not be able to legally drill for any of those. Sometimes the drilling is more expensive than the company can afford in a current financial climate, or they have issues getting the things they need to drill safely, such as in a supply chain crisis. And, some of the time, companies are hoping to aid their pocket books, since they aren’t non-profits. That doesn’t mean that slowing drilling permits is a good way to help the situation.
Now let’s consider manpower issue. Oil workers have been demonized, especially by the AGCC alarmists and their governmental allies. This means that when people are looking for jobs, they try to avoid these kinds of jobs. As a kid just out of college, I knew that the last thing I wanted with my degree was to work in a refinery. However, like so many other things that went wrong with my plans (college acceptance, financial aid, major availability, inopportune illness, university and national politics, etc) I was unable to attend the job fair and use my college’s job placement function and had to strike out on my own. I got hired at a refinery, which initially horrified and depressed me. But in short order, I learned what a fascinating thing refining is (and how all my organic chemistry actually had very important, real-world applications), and how vital it is for our country and our standards of living.
It is very hard for oil companies to hire good people and there is a reason they pay you tremendous amounts of money. You work horrible hours at times, you are overworked, and you have to often live in places that no person wants to live due to the forces of NIMBY-ism. I made six figures three years out of college, but at one point worked the jobs of four or five people simultaneously. But now consider the Great Resignation, the quiet quitting, and masses of people leaving the workforce in the aftermath of the pandemic, and the problem of hiring good people has intensified tenfold. So even if you have the refining capacity, and even if you have the crude oil supply, if you don’t have the people to run the refineries (or at least run them well), then you can’t actually produce more.
Finally, we have things that are NOT the government’s fault. Crude oil is full of impurities and most of those impurities do fun things like eat steal. These issues, like ammonium bisulfide, vanadium, high temperature hydrogen, and even just plain sulfur cause refineries to regularly need to shut down their units for maintenance. If you don’t change the oil in your car, eventually it stops running. The same applies here, but instead of 15 minutes at your local shop, these take weeks to work on. You have to change out or regenerate catalyst in the reactors, fix leaks sprung in heat exchangers, replace pumps, flix flanges, weld pipes, etc. There may be expansions being constructed, or updates added in. It is no small effort and usually takes at least 2 weeks to months to get back to running fully, if at all. Sometimes they have to shut down the whole place for the electrical grid, sometimes they have to shut down one crude tower and can limp along. This is not something that people who don’t work there can predict, other than there will almost always be at least one small maintenance shutdown a year. The vast majority of the refineries south of the Mason Dixon line do their shut downs in the winter due to reduced needs and cooler weather. (You don’t want to shut down when it freezes, but you don’t want to shut down when it is 100 either.) Northern refineries will run through the winter (see comment on freezing), but the southern ones are the big ones due to water shipping availability.
People often say, well, they can skip this shutdown or postpone it to get us through this crisis. That is a phenomenally bad idea. It is possible, usually to the tune of tens to hundreds of millions of dollars, to shift the timing of a shutdown by a few weeks or months but the longer you postpone, the more likely it is that something will explode, killing people and releasing pollutants at a horrific rate. Many units are run ragged just to reach planned shutdown and need that time off to fix. Many catalysts are planned to hit End of Run (EOR) and need changed out, and nothing you can do will make them safely make another few weeks. EOR is a massive limiting factor and if you are there, it is like running out of gas on your car. You aren’t going anywhere, and unlike gas, where you can walk to any of the plentiful stations and get back on the road easily enough, catalyst change out is a specialized activity with highly trained contract professionals, most of whom have complex schedules and can’t drop everything they do for their other customers just for you. We are entering into our country’s refining shutdown season. Most of the distillate refining in the nation will be offline for our own best interests, long term. This lowers distillate availability in the short term as well.
What are the solutions? I don’t see any good ones. We can ask petroleum companies to modify their shutdown plans to limp along. This will cost them hundreds of millions of dollars each, most likely, and the government cannot get away with paying those costs without offending the AGCC crowd. People get up in arms because of the “tax breaks” oil companies get because they are allowed to use depreciation of assets as a tax management strategy (like most other businesses). Even if they take that financial hit willingly, there is only so much they can do. They need their shutdowns for safety, environmental compliance, and reliability. This can provide some relief now, but at the cost of future issues that are near guaranteed.
We can encourage expansion, which means getting the EPA out of the way, because the permits here are ugly. Many refineries are plot limited due to being in the middle of cities or up against physical boundaries. Expansion is possible, but difficult in many of these cases and impossible in others. Even if you could fast track EPA compliance from the usual 6-12 months to merely weeks, parts are long lead items. A single high yield pump takes 6-12 months to arrive on site, and that was before the supply chain crisis. Depending on the catalyst, you are multiple months out for a full load and the factories that make them are often behind anyway. This is a good idea for the future, but cannot solve the current problem.
We can encourage new refineries. This is a multibillion-dollar undertaking, that needs help from all levels of government and will drastically remake the communities it affects. It will require people to force the EPA to allow the work. It will require most areas to find place to put a refinery and all of its needed acreage. It will take water rights, major construction, and supply line fixing. This would make things better for decades to come, but could not fix our problem now.
We can tell people to suck it up. We can hope that the winter is light. We can agree that people just can’t have the things they want for Christmas because we need to focus on food. We can price control things. We can have big government intervention. We can worsen inflation. We can let people die. These are the most likely, and not good options. Our other hope is that this is simply a tactic to affect the election, but as it is coming from both sides of the media, I don’t think so.
I hope I’ve missed a solution, but really, we are in a bad place. The most likely solution is a combination of asking/forcing refineries to push out more at the cost of the future and accepting higher costs and higher deaths in the US while blaming the problems on the other party and the greed of the oil companies.