For this time of year, the diesel market in the U.S. has been unusually bullish. In fact, the soaring global demand for diesel is forcing refiners to restrategize their production schedules.
Typically, refiners start building their diesel inventories around April when the weather is warmer and more cars are on the road.
But the increasing demand for diesel was a determining factor in pushing diesel production well into May this year.
Trying to pinpoint the exact reason for this skyrocketing demand for diesel is an effort in futility.
Below are some notable reasons why the global production of diesel is going through the roof in 2017.
Registration of new diesel cars is boosting diesel production
Contrary to popular belief, diesel-powered engines don’t have to be loud and messy. It’s, therefore, not surprising that this same engine is causing notable waves throughout the U.S.
According to estimates, the number of diesel-powered cars on American roads is expected to double by 2018.
In the wake of new engine technology and advancements in fuel efficiency, today’s diesel car is endeared by many. A whopping 280,000 new diesel cars have been registered across the country in the past year alone.
This increase in popularity of diesel cars among American consumers shows growing confidence in the production of diesel.
If you’re still undecided on using diesel-powered engines, here are a few perks of using one.
- They have more power. A diesel engine produces more torque than a gasoline engine.
- Diesel engines don’t compromise on fuel efficiency.
- Does going to the pump less often sound enticing? Diesel is richer in energy compared to gasoline. This means $10 worth of diesel can take you further than an equivalent amount of gasoline.
The recovery of freight movements in the U.S.
After stagnating for most of 2015 and 2016, freight movements in the U.S. have started edging up.
Most of the equipment used to haul freight is powered by diesel engines.
Freight is, therefore, a key driver in boosting diesel production. The current demand for diesel in freight is being fueled by a cyclical recovery in the sector which is panning out well.
During the sluggish 2015/2016 freight period, businesses were busy trying to reverse an unprecedented build up in existing stock, work in progress, and finished goods along the chain of supply.
Having cleared up the supply chain, companies in the freight business are now showing more confidence in the economy and picking up more orders.
Ultimately, they’ll need more diesel to keep their operations running seamlessly.
Better profit margins for refiners
Here’s an interesting fact. Refiners in the U.S. can switch between diesel and gasoline production as they deem fit. This depends on how attractive the profit margins are.
And diesel is proving to be more lucrative compared to gasoline production.
The diesel crack spread, which is a key indicator of profit margins, shot up to the highest level we’ve seen this year during the last week of May. On the flip side, the gasoline crack spread was the lowest it has ever been in almost three years.
This is an added incentive to refiners to concentrate on diesel production.
There you have it, folks. If you’d like to learn about diesel-based power solutions for your business and the options available to you, get in touch today! We’re always happy to help.
