Historically low diesel inventory in the Northeast coupled with a lack of refining capacity is putting the region in “a very precarious state,” says one energy analyst.
“Seventy percent of the homes that use heating oil as a winter fuel are located in the Northeast. And quite frankly, we don't have the refinery capacity,” Schork Group Principal and Co-founder Stephen Schork told Yahoo Finance Finance live this week.
Homeowners are bracing for rising heating oil costs as the U.S. heads into the winter months.
“We don't have the supplies. And right now, we're now going into the peak demand season. So we're in a very precarious state,” he added.
“If you maximize your gasoline production out of the crude oil barrel, something has to give. And that giving has been the diesel fuel market. So we're going into this winter with historically low inventories,” said Schork.
He points out whenever the Northeast diesel market used to ran out or was low on fuel, the industry would rely on imports coming in from the Northern European refinery areas of Amsterdam, Rotterdam and Antwerp.
“With what's going on in Ukraine, the United States cannot rely on those imports. But we've known that now. We've known that since February. So a lot of that has gotten priced in,” he added.
The U.S. has also been increasing exports of refined products to Europe amid an energy crisis in the region prompted by the Russia Ukraine war.
Ines is a senior markets reporter covering stocks. Follow her on Twitter at @ines_ferre
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