Industry blasts, media headlines, and more are throwing around the term “diesel shortage” to describe the current diesel market situation. Fuel buyers must make sure their business has enough fuel in the ground to keep their operations running – so what needs to change going forward? Today, we’ll be looking at the diesel shortage and explaining what that means for you.
The term “shortage” can mean different things in different applications. A shortage of M&Ms is unfortunate. A shortage of oxygen is life or death. So on the spectrum from “oh, brother” to “the sky is falling”, where does the diesel shortage stack up? And as a commercial fuel buyer, what should you do?
What a “Shortage” Means for You
Shortages are nothing new. The logistics industry has faced a driver shortage for many years. That shortage has made business more difficult and sometimes resulted in shipping delays… but at the end of the day, deliveries still happen. The chip shortage has caused some automotive companies to ship cars and trucks without certain parts and install them just as the product leaves the dealership. During the pandemic, consumers faced a devastating toilet paper shortage. Each time, consumers and the business community have weathered the storm – and the diesel shortage is no different.
For diesel specifically, the shortage will be painful at the macro level, but hopefully manageable at the micro level. Put another way – a tight diesel supply will force prices to go up, which will eventually make it too expensive for some people. High prices will bring demand back down enough that it balances with limited supply. At the US economy level, that means pain as consumers cut back and businesses slash costs. At the local, load-by-load level, supply will still be available for those for whom diesel is a business-critical priority.
That’s not to say there won’t occasionally be situations where there is a true physical lack of products. Some cities might run dry on diesel for a few days, at least at the terminal level. But the fuel supply chain is dynamic, and suppliers will rally to fill in any gaps in supply. Once again, those shortages will drive up prices, which will make it economical to long-haul product from surrounding markets which do have supply. The fuel will be delivered but at higher costs.
How Commercial Fuel Buyers Should Respond
For commercial fuel buyers, the diesel shortage will mean different things depending on how you buy fuel.
Bulk Fuel Buyers
If you buy fuel by the truckload and receive it in a storage tank, then work with your fuel supplier to understand how current volatility affects you. First and foremost – don’t panic. For the most part, bulk fuel should be available during normal means in most areas. It doesn’t hurt to keep an eye on your tank inventories to make sure you don’t get too low – but avoid panic buying, ordering fuel when you don’t know whether it will fit at the delivery time. These result in retains, which mean higher costs for your supplier and fees on your invoice.
Hopefully your fuel supplier will alert you when local supply conditions devolve into a real operational challenge. For Mansfield customers, be sure to sign up for Supply Alerts on our Subscribe page.
Now is also a good time to understand your fuel company’s supply capabilities. For instance, Mansfield buys fuel on over 300 different refinery contracts, has supply positions at 900 fuel terminals across the US and Canada including Mansfield inventory in some areas, and works with 1,500 delivery partners. When a market runs dry, Mansfield has supply and freight ready to deploy from every other nearby supply point to ensure customers stay supplied. Whoever sells you fuel, make sure you have a clear understanding of their supply portfolio and emergency fueling guidelines.
Mobile Fueling Buyers
When you utilize mobile fueling, you don’t have the luxury of a large storage tank on your site to provide supply security. That makes it especially important that you work with a large fuel partner with back-up options – if your fuel jobber runs out of fuel, then your fleet is out of commission.
To reduce this risk, Mansfield recommends having emergency fleet cards deployed and ready to use, just in case. These cards are a low- or no-cost back-up, but can give you access to fuel in a trackable way during a crisis. If your equipment is off-road, consider installing a small bulk tank to ensure you have some emergency fuel ready to go. The key in both cases is deploying a plan before a real outage, otherwise it may be too late.
Fleet Card Users
Retail consumers shouldn’t expect to see widespread fuel stations with bags over the pumps. It may happen on a rare occasion (and when it does, you’ll be sure to hear it in the news), but in general retail stations will find supply and stay running. Higher prices will simply get passed on to consumers.
If you administer a fleet of drivers using fleet cards, be sure to coach your drivers on when it’s worthwhile to shop around on price. If they average 30 gallons per fill-up, then a 20-cpg difference equates to $6 – which may or may not be worth the time and effort of researching stations and travelling off-route for a better deal.