25 Day Diesel Supply, Lowest Since '08

WMno57

https://www.bloomberg.com/news/articles/2022-10-19/a-25-day-diesel-supply-and-surging-demand-are-a-worry-for-biden
I'm not posting to argue politics. Please ignore the second half of the Bloomberg article title. This affects everyone, whether you are blue or red. Let's try to keep the the discussion focused on supply and demand. I know there are people here who have insider insights.
Farmers use 4 times the Diesel to harvest in the Fall than they do for planting in the Spring.

random12345

I just called my oil company. Here in MA, we are at close to $6/gallon. My company is not worried about running out at this time. They have multiple suppliers and none of those have so far expressed concern. I doubt they would though. We'll just have to wait and see.

Jamie Hall

Spot prices are high, and very likely to remain so in the northeast (so are LP spot prices, by the way). The bigger established heating oil suppliers, though, almost all offer prebuy programs, which were much less expensive. They are not smoke and mirrors (at least in the better companies!) -- how they work is that you buy X thousand gallons (they usually have a floor of at least a thousand gallons) for delivery on a future date or dates, and the company then bundles those orders into a few tens of thousands of gallons, and buys what are called "futures" on the commodities market. Those futures, though, for a commodity, are actually a firm commitment on the part of the producer to furnish, and the buyer to accept that amount of the commodity, in this case heating oil or diesel. Anything which is left over after honouring those contracts the supplier can -- and does -- sell on the spot market, for whatever the market will bear.

There is a force majeure clause in the contracts, but it is remarkably difficult to invoke. What actually happens if shortages start to appear is that these are in the spot markets, and those prices can and do go all over the place on very short notice.

A good commodities trader if he or she is fortunate can make good money on futures -- he or she can also lose his or her shirt, rather spectacularly. The ultimate purchaser, in this case the oil company and the homeowner, can also lose rather badly if things don't turn out well -- they are obligated to pay X dollars per gallon for the oil, and if the bulk price drops... oops. One of the ways the oil dealers handle this is that there is a clause in the prebuy contract which says the ultimate user (the homeowner or whatever) is going to take that oil (and the amount they can contract for is not more than previous usage), regardless of the price on the spot market. You win some, you lose a few.

In a way it is very much as though the ultimate user were able to actually take delivery of that oil on that date at that price and store it on the premises -- but that's not usually practical!

leonz

It is too bad the president is being blamed for the actions of a bunch of capitalists seeking to increase
profits for themselves and their shareholders.

Back to farming:

Yes, they do consume a lot of diesel fuel in some cases because of the large combining machinery used to harvest the crops that love to eat diesel fuel.

Minimum tillage methods also use a great deal of fuel as the chisel plowing and preseason fertilizer
dropping also consume a great deal of diesel fuel as the tillage equipment used is ground engaging
(it digs in) as well is also very wide and requires a great deal of power to pull ground engaging equipment like strip tillers or chisel plows with seed carts used to deliver fertilizer in the row behind the strip tiller, chisel plow and or subsoilers.

If deep mined Gypsum was spread on heavy soils and plowed in and it would become easier to work as the clay in the soil would be dissolved. Adding lime to these soils would also increase the ph and bring it up to neutral as well.

Many thousands of tons of limestone waste mud from the sugar cane and sugar beet factories sugar syrup stripping towers is landfilled because no one uses it for making better soil health.

The sugar beet growers are beginning to use the limestone waste from the sugar syrup stripping towers to make the heavier soils they farm better and they are increasing the sugar beet crop rotation period
from 4 years to five years and they have seen a much greater increase in sugar beet tonnage per acre and a resulting increase in beet sugar tonnage per acre.

A modern diesel powered combine can use 400 gallons a day to harvest cereal grains or corn depending on the width of the combine head which can reach 45 feet wide or more for cereal grain combine heads.

The corn and cereal grain combine heads made by some manufacturers have become so large in width that they have to be transported by a trailer dolly from farm to field and attached to the combines in the field being harvested.

The combines work the fields and a second tractor and grain cart mounted on rubber tracks can carry 36+ tons of grain will transport it to the tractor trailer on the edge of the field to transfer it to the trailer and the truck trailer will transport it to the farm where it will be off loaded and conveyed to a wet grain storage bin and then moved to the grain dryer using in bin auger systems.

A lot of money is wasted growing corn for ethanol in the process when sugar beets could be grown to make much more ethanol per acre employing ridge tillage using the ethanol making method pioneered by Dr. Gibbons.

The same can be said for grain drying when using the mass flow hot water grain drying method is used

to dry cereal grains using less costly Sub Bituminous Coal from Montana and Wyoming for fuel.

As most all farmers do not collect the biomass created by the growing of corn and fine cereal grains they end up wasting a huge fuel resource that takes many years to decompose in the field rather than composting the biomass and then adding it back to the fields to increase soil health or making pelleted biomass fuels.

Sorry, I guess this is really boring.

STEVEusaPA

Couldn't read the article without signing in/creating an account. Keep in mind also, when it gets very cold, gas companies will switch their large accounts (interruptibles) over to heating oil so they can maintain gas supply to the rest of their customers. This puts a huge strain on heating oil companies trying to supply their regular customers. The price shoots up when people need it the most, and supplies get rationed (allocations). This causes the average consumer to think about switching away from heating oil to gas (the ones who created the problem).
The other side of the coin is people who locked in will do great this year. People who lock in next year will probably give those savings back. And it will get worse if the companies who offer lock ins, didn't back it up with wet barrel purchases, or downside insurance. Those companies who lock in and don't do that are the ones you see on the news, not delivering on their promises, and accused of fraud and/or go out of business
.
I don't really trust the 'inventory' numbers. You see it quarterly with OPEC.
"We're cutting production." The prices shoot up.
Then, when the inventory reports/audits come out, we usually find out that not only did they not cut production, they increased it and made extra billions of dollars.
Now the price drops for a few days. OPEC comes out and declares "We're definitely cutting production". The price shoots back up again. And over and over.
Another familiar thing I hear is "Open up the pipeline". Another false political statement. Last time I looked into it, 3/4 of the pipeline is open. The last section will provide these companies with one huge profitable benefit-the ability to make it easier to export more petroleum products out of the country. I've never heard one oil-producing company state if they open the pipeline, Americans get product at a discount. They will always sell to the highest bidder.
The sad reality is American has never had an energy policy, except Jimmy Carter's "...turn down your thermostat to 62 and put on a sweater".
We fought 2 wars in the middle east, and came home with no oil, not even honorable partners in the middle east.
Of course we have to get off fossil fuels and move to renewables. Bio diesel has a huge upside. Supplementing with wind, solar and even better nuclear has to be pushed for a better planet.
The price we are paying for energy in the USA is what Europe and even Canada has paid regularly for years.
They didn't politicize it. The government pushed for energy efficiency and renewables, over profit. And sadly made a bad deal with Russia.

Jamie Hall

There seems to be common misconception, reflected in a post a couple above, that farmers are rather dumb and just keep plodding along doing dumb and wasteful stuff.

Um, no. There are -- or were -- some, but most of them have long since gone broke and fled to LA or some other city. The ones who are left are a bunch of really smart guys, and they are willing -- and do -- pay a great deal of attention to the best practices and most efficient (both in terms of money indirectly, and things like fuel and fertilizer) to produce the most food crops they can.

If farmers don't collect biomass it isn't because they don't know any better, it's because -- sorry -- the return on the cost to do so is negative.

If farmers grow corn for ethanol, and a lot do, it's because the fuel companies are forced to add ethanol to fuels, so the market is excellent. Whether ethanol added to gasoline is good or bad is another discussion, it's required by the Feds, so it is what it is. When your profit margin is pennies on the dollar, you don't turn down a good market. The same can be said for soybeans for biodiesel.

Using Wyoming coal for drying would be fine, except that many jurisdictions prohibit large coal fired installations.

Bottom line: don't knock farmers. We may be few (less than 3% at last count) and we may not dress in the latest styles, and most of us don't work on Sundays except for necessary chores. But we know what we are doing, and we are astoundingly good at it. We feed you. We clothe you. We even provide the wonderful natural open landscapes you profess to love. Live with it.

WMno57

STEVEusaPA said:

Couldn't read the article without signing in/creating an account.

I also get that intermittently with Bloomberg and this article. Most news sites store cookies on your computer. Many news sites will give you a couple free articles, then throw up the paywall. That seems to be the case here. I was able to duplicate what you saw, delete my cookies, reload my browser, then re click on the link to get the full article.

JakeCK

Using incognito mode on the browser also often works to get around the paywalls.

leonz

Hello Jamie,

My maternal grandparents were farmers in Greece and they used mules to farm.
I was not trying to insult the agricultural community at all or insult the farmer that follows the best agricultural practices.

Using a coal stoker for drying corn would not require a large boiler plant at all. A battery of small rolling grate coal stokers could be used to feed the plate heat exchanger which would dry the corn or cereal grains easily.

My talking about composting was simply describing how corn stover, corn cobs and straw from cereal grains could be used for both fuel and to make compost.

Stover harvesters are towed behind combines to bale the corn stover as well as wheat and oat straws as well.

Piling any compostable material to make compost in huge volumes is done in long rows and allows one to use a motorized compost turner that like a player piano roller with long fingers that is used to control the vacuum used to play the piano rolls or sheet metal discs in nickleodians.

The long piles of compost feed stock are flipped several times to expose the feed stock to the air to aid in its decomposition until the compost stops cooking.

After that they could bag it sell or sell it in bulk, use it in a biofuel burner to dry crops or pelletize it and use it for fuel in a tuyere/burn pot underfed stoker to dry crops or heating farm shops or for making steam if there is enough fuel and burning capacity to maintain a dry steam flow to a grain dryer.

I am grateful that I can buy American grown farm products like milk, eggs, beef, pork and cereal grains and in the process support American agriculture.

I am glad that farmers that crop farm, raise sheep or cattle, meat goats, or make milk to make local cheese are still able to claim sales tax exempt status to buy farm equipment, parts, diesel fuel, propain, gasoline, oils, pesticides, herbicides, fertilizer consumables like baling twine and wire, rubber tires and rubber tracks for tracked farm equipment and many other needed items like crop insurance.

The farm subsidy program needs a lot of work; and by that I mean faceless corporations like Textron that own land have a large number of stockholders that take advantage of agricultural subsidies should be examined and have their subsidies reduced or eliminated as they are not family farms.

When John MCcaine -spelling? was running for president he went on and on about the sugar subsidy and how he was going to eliminate it as the corn syrup lobby was pushing and contributing to his campaign that really was red herring.

There is no sugar subsidy, The cane and beet sugar market is based on price supports not subsidies which maintain a stable wholesale price for sugar in the marketplace which provides a stable income for beet farmers and prevents wild price swings in the sugar market.

The sugar price support method also prevents foreign imports of less processed, less pure and clean Mexican sugars that have to be refined again from flooding the market as well as the rendered corn sugar producers flooding the market and eliminating beet and cane sugar as commodities.

Foreign landowners that buy American agricultural land and farm it using local farmers to farm it and ship hay stocks to Saudi Arabia to feed the diaries there are able to obtain subsidies as well and should have the subsidies examined and or reduced even though it is an export crop.

The fact that the American farmer buys everything at retail and sells commodities like eggs and animals at wholesale-some would say fire sale prices will always put them at a disadvantage economically and the saying about staying in farming is a case of either get bigger or get out is still true.

When the dairy buyouts created by President Reagan caused a huge loss in dairy cow numbers.
It created a bonanza for the artificial insemination business by tweaking the genetics of milk cows and creating more milk with fewer cows which in turn creates more stress for the cows as they are milked 3 times per day.

The milk cows are fed more silage and feeding them more high moisture corn creates more methane in thier waste as they are being fed more high moisture corn silage instead of only high quality hay and hay ensilage which reduces the amount of methane a cow or steer will produce.

Locally the company referred to originally as Eastern Breeders and then purchased by Genex which is a French firm I believe shut down thier entire bull breeding and semen producing operation as the entire
artificial Insemination business as an entity essentially bred themselves out of business and many fewer bulls are producing the same semen making super cows which does not bode well for bovine genetics worldwide.

Larger more powerful machinery allows the farmer to buy more acreage to use bigger and wider tillage tools, wider planters to plant seed faster, spray chemicals wider and more efficiently reducing thier per acre cost for fuel, seed and chemicals and do it with less labor.

The farmer does all this to have more gross income and also improve the land by installing drainage pipe and I am all for that; as a small farmer will always be in trouble and a victim of the market forces at play at the Chicago Mercantile Exchange that cracks the whip on speculating for grain, livestock on the hoof, pork bellies, oil and so many other products used by consumers.


Jamie, if I offended you, I am sorry.

Jamie Hall

No, @leonz , you didn't offend me at all. And you are very right that farming is a business of go big or go home; my family sold its dairy business a number of decades ago -- we weren't big enough to raise enough capital to operate with the help we could get at a price we could pay. The only places near me are either (one instance) owned by very very wealthy people who can afford to lose money -- and do -- or are family operations which managed to stay alive and grow (there are three of those left in the County).

The only reason I wrote as I did is that so few people have any idea at all of what goes into farming today -- not the pick your own little places one sees in so many suburban areas, but farms which are capable of supplying the needs of whole cities. An interesting aspect of it -- but way off topic! -- is the gradual substitution of mechanisation (and hence, large amounts of capital -- one of those harvesters you mentioned can run into the high six figures) for labour, which isn't available at any price. It's hard to attract that kind of capital, as the return on investment is uncertain and, even in a good year, pitifully small. And farming is becoming increasingly regulated, which adds to the costs of doing business. That's where the big corporations come from -- they can take risks with their capital which a family, or the local bank, can't.

Did you know that to be legally called a farm (and get the grants and tax breaks etc.) one only needs to turn a net profit two years out of five? There aren't all that many families that can survive three years of losses in a row!

leonz

Hello Jamie,

What I find hilarious is how a neighbor games the system with his ag trucks, he can operate them on the road for three months of the year and take them off the road to avoid the 90 day inspections and save a huge amount of money on insurance and ag registrations as well.

He was averaging 300K in annual crop subsidies as well, so he will continue farming well into his
retirement with his immediate family

Jamie Hall

Construction and logging companies have even better ways to game the system -- your equipment, at least in New England, gets nailed for a personal property tax (which can be eyewatering). It's assessed on everything you have in the yard on a specific day. So... when it comes up to that day, you load everything up on your flatbeds and take it to some different jurisdiction... moving your gear doesn't come cheap -- but it's cheaper than the property tax by a long shot. Perfectly legal.

HomerJSmith

Jamie, how do you know that the 25 day supply is an outlier? It may be the standard operating modality. All you may have at any one time is a 25 day supply, barring refinery fires or other anomalous shut downs.

Jamie Hall

I read the trade news -- not just main stream media.

rconkling

Joel Salatin has a lot of things to say about the current state of our food system.

HomerJSmith

Jamie, I never look at the main street news. I haven't looked at a local new show on TV in at least 15 yrs. I have been lied to and manipulated so much that I have become an extreme doubting Thomas. I don't read the oil or refinery trade journals, but read those who do. When I see scare tactics such as the 25 day thing, I ask who put it out and for what purpose, Cui Bono. I look for collaboration from other knowledgeable sources, the trucking industry, airline industry, farming industry, fuel marketing associations, etc.

There is always some Bugaboo that scares the people, witless. This I suspect may be one, we will see. Remember, bad news sells and good news doesn't.

"...stop consuming “news” and “opinion” designed to polarize, addict and derange."--Charles Hugh Smith

Jamie Hall

My primary source for the diesel supply figure was my oil and diesel dealer. secondary sources were logging and trucking trade magazines.

OuterCapeOilguy

I checked with my oil company here on outer Cape Cod, they were unaware of any potential supply issues. I can't help but notice that while gasoline prices have fallen back to around $3.60-$3.85/gal., Diesel is back up to its outrageous prior level, as is heating oil.

WMno57

"Shuttered refineries unlikely to start back up are the latest nail in the U.S. refinery coffin. In June, Chevron CEO Mike Wirth posited that there would never be another new refinery built in the United States.

“Building a refinery is a multi-billion dollar investment. It may take a decade. We haven’t had a refinery built in the United States since the 1970s. My personal view is that there will never be another refinery built in the United States,” Wirth said at the time.

Oil and gas companies would have to weigh the benefits of committing capital ten years out that will need decades to offer a return to shareholders “in a policy environment where governments around the world are saying ‘we don’t want these products to be used in the future,’” Wirth added."

https://oilprice.com/Latest-Energy-News/World-News/Energy-Execs-Tell-Granholm-Shuttered-US-Oil-Refineries-Wont-Restart.html

archibald tuttle

random12345 said:

I just called my oil company. Here in MA, we are at close to $6/gallon. My company is not worried about running out at this time. They have multiple suppliers and none of those have so far expressed concern. I doubt they would though. We'll just have to wait and see.

As long as folks cough up the six bucks there won't be shortages. But if the election goes the wrong way and you get price controls we'll have shortages because better prices can be got elsewhere. (In case anybody forgets the 1970s).

archibald tuttle

OuterCapeOilguy said:

I checked with my oil company here on outer Cape Cod, they were unaware of any potential supply issues. I can't help but notice that while gasoline prices have fallen back to around $3.60-$3.85/gal., Diesel is back up to its outrageous prior level, as is heating oil.

No duh, heating oil is far more fungible than gasoline. It is road fuel, off road fuel (construction and ag) home heating and substituted for gas electric generation because pipelines have been blocked and existing can't keep up during heating season. On top of that it is easy and relatively safe to transport compared to natural gas so where it can be substituted for gas in europe it may well be. And when what refineries we have are going great guns making #2 that naturally produces more gasoline at a time of year when less is needed keeping a lid on the price. @WMno57 is right about the plight of refineries (or really our plight because we have all but outlawed investment in them). One thing that has changed since the 70s is that the chemistry and approach can be update to be more than a fraciton distillation process, allowing the refinery to skew its output of various fractions to suit the market, but, of course, more widespread investment in these technologies is now discouraged as well.

I Got a good lesson in transport fungibility after converting from fuel oil to propane around 2010 and in the late fall of 2013 a wet harvest in the northern great plains drew propane in tanker trucks from across the country spiking prices here in the NE like I had never seen before. (Brilliant policy at work, drying corn with propane so we could make ethanol to pretend we were good envrionmental doobies-be one thing if we were feeding the world.). I guess the installed infrastructure didn't favor fuel oil or fuel switching. I've never serviced a grain dryer . . . anyone?

Jamie Hall

Just to add to the fun -- check national Grid's and New England ISO's comments about rolling blackouts due to limited natural gas supply...

WMno57

My brother currently has a separate box on his central AC. The electric utility can turn off his AC at will. He get 40 bucks a year for this. In a few years most homes will have these on their heat pumps and car chargers. You wont get paid for it either. Policy will transition from carrot to stick. Those who don't have these will get a total blackout of their home, until the grid can meet demand.

ChrisJ

WMno57 said:

My brother currently has a separate box on his central AC. The electric utility can turn off his AC at will. He get 40 bucks a year for this. In a few years most homes will have these on their heat pumps and car chargers. You wont get paid for it either. Policy will transition from carrot to stick. Those who don't have these will get a total blackout of their home, until the grid can meet demand.

Why watch the news for scare tactics and sensationalism when you can just read a forum.

WMno57

Smart meters and demand shaping could have kept the grid up in texas in 2021. 250 to 750 people died because of that outage. The goal is to keep the grid up. @chrisj which would you prefer, a 6 hour outage of you ac in july, or a 4 day blackout?

ChrisJ

WMno57 said:

Smart meters and demand shaping could have kept the grid up in texas in 2021. 250 to 750 people died because of that outage. The goal is to keep the grid up. @chrisj which would you prefer, a 6 hour outage of you ac in july, or a 4 day blackout?

Neither.

Jamie Hall

Perhaps the best way to think about this sort of thing is not to worry about whether or not it is a scare tactic, or to think about what might be done 5 to 10 years from now -- which is largely a political question -- or what should have been or not been done a few years past -- also a political question -- but to seriously ask yourself, whether you are a homeowner or a pro. working to provide adequate heat for clients what, exactly, is your plan B if rolling blackouts or gas or oil shortages occur?

If you have a plan B, and you don't need it, well and good. If you don't have a plan B and find you need it, it really doesn't matter a bit what your preferences or politics are, you are still sitting in the cold and dark.

ChrisJ

Jamie Hall said:

Perhaps the best way to think about this sort of thing is not to worry about whether or not it is a scare tactic, or to think about what might be done 5 to 10 years from now -- which is largely a political question -- or what should have been or not been done a few years past -- also a political question -- but to seriously ask yourself, whether you are a homeowner or a pro. working to provide adequate heat for clients what, exactly, is your plan B if rolling blackouts or gas or oil shortages occur?

If you have a plan B, and you don't need it, well and good. If you don't have a plan B and find you need it, it really doesn't matter a bit what your preferences or politics are, you are still sitting in the cold and dark.

We're trying to help people get both steam and HW boilers piped so they will actually heat the house and meet the manufacturers absolute bare minimum specifications. More often than not this seems to result in a battle that isn't deserved.

And in some cases, not tie a plumbing vent into a direct vent appliance.


I think what you're asking is way too much.

Jamie Hall

Probably I am, @ChrisJ ! But I credit always having a plan B to still being here to harass folks... not that I've had to use most of them, but I have had to use a few!