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Mark Moss provides a good explanation of why we have a diesel shortage. And why the problem is not going to be solved.
In case you have missed it, the supply of diesel is down to a 25-day supply. As Moss explains, that doesn’t mean we will run out in 25 days. It does mean that at the rate we are using diesel, the supply is 25 days. Diesel is being replenished, but that diesel is getting more and more expensive and likely the cushion will also decrease.
So what’s the problem?
Refineries are in short supply and the capacity was greatly reduced during the Covid pandemic. Many diesel refining companies went out of business. To bring even those refineries back online will be expensive (billions of dollars). Plus many of the refineries that went bust are old, prone to breakdown and inefficient. The payback period for new refineries is 15-20 years. But the Biden administration has declared that there will be no more diesel or petroleum by 2035. So there’s no possibility of paying back the investment. And even if the investment time horizon weren’t a problem, there would be an engineering problem because it takes five years to get new refineries up and running.
So why not import diesel? The spare capacity for diesel is in … Russia. So we have shot ourselves in the foot with sanctions.
The Biden administration’s solution is: Blame the oil companies. Of course.
Is there a more stupid group of people than the people in the Biden administration?Published in