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Low fuel supplies don't necessarily mean a winter crisis, experts say

Paul Sabato, a driver with Heatable, delivers oil to a home in Scarborough, Maine, on Wednesday, October 13, 2021.
Portland Press Herald
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Experts agree that the war in Ukraine has increased demand for American-made diesel, but they expect refiners to increase production for the U.S. market as winter domestic demand increases.

Global energy markets are complicated. But the current situation is pretty easy to understand.

“You can talk about so many factors, but there’s only one, I think,” said Osman Kilic, a finance professor at Quinnipiac University. “The war in Ukraine.”

He says the war has increased demand for American-made diesel in Europe, which has producers choosing to make diesel instead of heating oil. For now.

“Are we going to have an issue this winter? I would say no,” Kilic said. “And the reason is … refiners have to make an adjustment because this is their marketplace forever, [the] domestic market. So they have to start producing more for the domestic usage for the heating oil. They will do some catching up, but they will.”

He says the only problem will be if a hurricane hits the coast of the Gulf of Mexico, the heart of domestic production.

And Chris Herb, president of the Connecticut Energy Marketers Association, says the futures markets show that prices will soon go down.

“So there’s no incentive to build inventory. Why would a wholesaler fill their tanks in August with heating oil that's going to be less expensive in the future?”

Herb agrees that the war in Ukraine has increased demand for diesel fuel, and it has tightened domestic supply. But he expects there will soon be signs of change.

“As, again, the transition from summer to winter gasoline occurs, the refiners start to ramp up their distillate production, which is diesel heating oil ... And that is going to start happening in the next 45 days, and we will start to see that come online and be available for sale,” he said.

Herb says consumers don’t yet have cause for concern.

Jeff Cohen started in newspapers in 2001 and joined Connecticut Public in 2010, where he worked as a reporter and fill-in host. In 2017, he was named news director. Then, in 2022, he became a senior enterprise reporter.

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