You’ve seen it in the headlines – a diesel shortage in pockets of the U.S. and prices here in Wisconsin soaring. Jason Schwantz is the senior vice president of refined fuels at CHS. He tells Mid-West Farm Report it simply comes down to high demand and low supply. And he says it’s primarily because refineries are at low capacity.
Agriculture is feeling the sticker shock as harvest continues this month. Schwantz says during the pandemic, when demand slowed, refiners reduced capacity. When demand came back, refiners have yet to pick back up to meet it. National news reports flag demand as being at its highest since 2007.
“If demand is going to remain strong, we need more output,” he says.
He says the Midwest has yet to feel a shortage like some pockets of the U.S. in the South and on the East Coast. Schwantz notes that folks who depend on diesel coming from the Gulf region are feeling the pinch more so than states like Wisconsin due to low river levels and barge constraints. He says our fuel is trucked over from neighboring states.
“We seem to be getting by in the Midwest,” he says. “It’s not like there’s an abundance of diesel fuel out there, but there is enough to meet our demand needs in the Midwest.”
Other components putting pressure on diesel price are export needs, the Russia-Ukraine War, regulations on U.S. production, and overall decreased investment in refining capacity. This is problematic because of the need for diesel for agriculture, construction and transportation worldwide, Schwantz says.
He projects diesel prices to level off this winter, but remain high all the way through the spring of 2023. He says that won’t change until there are more investments in refining capacity in the U.S. to amp up supply.
From a risk management standpoint — Schwantz recommends locking in a price you like with your cooperative. He recommends filling up this winter to fill your tanks for spring. He also advocates for premium diesel to save on fuel economy.
Leave a Reply