Photo of the diesel sign at a fuel station with "Industry Trend" label

The dwindling supply of diesel is continuing to take its toll on the construction industry, and professionals are beginning to worry as late October reports indicated there could be less than a month’s supply of diesel remaining in the U.S.

New data has given us a peek into the reality of the shortage, showing that prices of diesel are up 0.35% from last year, a significant change that has effects across the industry.

One energy company has come forward to initiate emergency protocols during this crisis: Mansfield Energy, a fuel supplier serving a massive portion of the United States. According to BNN Bloomberg, “Mansfield Energy is now requiring a 72-hour notice for deliveries to secure fuel and freight.”

The uncertainty of what’s to come is putting pressure on contractors, as fallout from a shortage could impact material costs, transportation, machine use, and more.

Factors at play in the diesel shortage

The diesel shortage has been slowly developing over time, but there are a few factors that have made things considerably worse. 

Patrick De Haan, an energy expert from GasBuddy, tells CBS News “Russia’s war on Ukraine, refinery shutdowns due to COVID-19 and Hurricane Ida and a fire explosion at a Philadelphia refinery back in 2019 have all contributed to reduced refining capacity of roughly 1 million barrels per day.” 

According to De Haan, Europe has also refrained from using Russian oil and the fight for fuel has strengthened, causing competition with the United States for diesel from other sources.

For some energy companies, fall is the perfect time of year for routine maintenance. Typically, fuel demand during this time is lower, and the capacity of the product kept in refineries usually is significantly less.

Unfortunately, Russia’s recent attacks on Ukraine, competition for fuel with other countries, and tragic events have coincided with this ordinary upkeep.

With worsening conditions, contractors are already feeling the dwindling supply-chain heat and could continue to do so. 

The construction industry needs diesel to function

With 98% of all energy use within the construction sector coming from diesel, a shortage in the market means a lot is at stake.

According to a column from Reuters, “Stocks of diesel and other distillate fuel oils were just 106 million barrels on Oct. 21, the lowest for the time of year since the U.S. Energy Information Administration (EIA) started collecting weekly data in 1982.”

Construction is heavily reliant on diesel for heavy equipment, building material haulers, company trucks, and more. There will be a direct impact resulting from an increase in overhead costs for contractors and a potential for supply chain delays and material price increases.

A popular idea, briefly discussed by Mansfield on their webpage, is “backwardation,” a downward-structured market where “future prices are lower and the curve slopes downward” on a graph. 

The market will typically shift into something called “contango,” an opposite situation where “future prices are higher than current prices, and the forward curve is sloping upward.” These processes will therefore affect the construction industry’s ability to access materials and transportation, the essential components that keep the industry going.

Some experts suggest panic isn’t necessary yet

A report from October 25 said that at that time, there were just 25 days left of diesel in the United States to go around. This certainly invokes fear for many in the construction industry, but it’s hard to say if it’s really time to consider drastic measures or not.

CBS News reassured that there’s no need for distress: “No, the U.S. is not going to run out of diesel fuel in 25 days.” And despite issuing emergency protocols, Mansfield Energy doesn’t seem too worried either, expressing that “the shortage will be painful at the macro level, but hopefully manageable at the micro level.” 

To clarify, Mansfield’s report stresses that “at the US economy level, that means pain as consumers cut back and businesses slash costs. At the local, load-by-load level, supply will still be available for those for whom diesel is a business-critical priority.” 

For contractors, there may be hiccups in the day-to-day business involving diesel, but many are suggesting these issues might not be devastating and irreversible. 

Prices certainly are fluctuating, despite the overall trend of a diesel deficit. Mansfield released a statement discussing what it means when prices go up and down, and how these trends may not be a clear indication of what’s to come. 

“We could see a recurring pattern in the next few months of supply tightening around the end of the month and early in the new month, then improving in the following days,” the company said.

Contractors should be aware of the problems related to the diesel shortage, as the supply is in fact dwindling and the future seems unclear. The industry is already dealing with labor and other material shortages, so the effects of a massive lapse in diesel supply could certainly create additional challenges within the industry.