By John Kemp, Senior Market Analyst at Reuters
U.S. diesel supplies are becoming critically low with shortages and price spikes likely to occur in the next six months unless and until the economy and fuel consumption slow.
As a result, retail diesel prices including applicable taxes are now $1.45 per gallon higher than for gasoline, a record premium, up from just 24 cents per gallon a year ago.
Distillate fuel oil is primarily used in freight transport, manufacturing, farming, mining and the oil and gas industry itself, so consumption is strongly influenced by the economic cycle.
Stabilizing then rebuilding inventories to more comfortable levels will require a significant slowdown in freight movements and manufacturing activity.
But a deeper and more prolonged slowdown in the United States and/or in Europe and Asia will be needed to boost inventories significantly.
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