Diesel Market Suffers from Low Supply, High Prices

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Reserves are low, and transporting fuel has become more expensive.

Fuel markets all over the world continue to be subject to wildly fluctuating prices and reserves. Oil and gasoline are not the only fuels being affected by this; diesel fuel has also been having a rough go lately, as numerous factors such as dwindling reserves, rising prices, and infrastructure complications have destabilized the market.

These complications have proven especially problematic for the railway industry, as many long-haul trains still rely primarily on diesel fuel.

“This is not only constricting the ability of farmers to export the soybeans and grain they grow but also to receive the fuel and fertilizer they need to operate,” Mike Steenhoek, executive director of the Soy Transportation Coalition, told CNBC. He added that an additional factor, that being draughts in the Mississippi River, have reduced trains’ ability to run properly.

“Now adding insult to injury is the increased uncertainty that railroads will be able to provide an effective lifeline during this critical time. It’s a vivid reminder that it is not enough to produce a crop or have demand for that crop. Having a reliable supply chain that connects supply with demand is also essential for farmers to be successful,” Steenhoek said.

Despite a previous agreement, railway unions of the United States have once again begun signaling for a potential strike, which would exasperate these difficulties even further. The financial concerns have been passed on to the country’s farmers, who are seeing diminished returns from their crops.

“In visiting with a number of farmers, the consensus, of course, is that diesel costs are one more incursion into profitability,” Steenhoek said. “As far as getting supplies, it looks like those areas most dependent upon the river are experiencing the biggest challenge. A couple of farmers told me diesel supply via their local vendor is day to day.”

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