Northeast Diesel Crunch: What’s Driving the Region’s Fuel Shortage?

Why the Northeast is quietly running out of diesel

The East Coast diesel market is tightening as inventories fall to historically low levels, prices rise and the region remains heavily dependent on fuel shipped from other parts of the country.

The situation is creating new pressure for trucking companies, particularly fleets operating in the Northeast and those with significant empty, deadhead or backhaul mileage. While many truckload carriers recover much of their fuel expense through fuel surcharges, those surcharges generally do not cover miles driven without revenue-producing freight.

Energy market data shows the scale of the problem. The East Coast typically holds about 62 million barrels of diesel in May, according to Department of Energy data. Recent inventories were below 52 million barrels, more than 50% lower than January levels.

In the Energy Information Administration’s regional classification, PADD 1, which covers the East Coast, inventories of ultra-low sulfur diesel fell to 19.375 million barrels from 20.4 million barrels the previous week. The region’s diesel stocks are at their lowest seasonal level on record, according to the data cited by market analysts.

Prices have responded. The national average diesel price reached $5.62 per gallon, while the East Coast average climbed to about $5.90 per gallon, up 63% from the beginning of the year. Prices in New England were up 75% over the same period, while the Mid-Atlantic saw an increase of 67%.

The market is especially expensive for buyers seeking prompt delivery. Diesel-to-crude crack spreads — a measure of the margin between refined diesel and crude oil — have reached unprecedented levels. The spread between Gulf Coast diesel and prices at the New York harbor, normally only a few cents per gallon, widened to as much as 66 cents last week.

That price difference is intended to attract more fuel into the Northeast, but moving diesel to the region is not straightforward. The Northeast increasingly relies on supplies from the Gulf Coast, much of which travels through the Colonial Pipeline. The trip from Houston to the New York market takes about 18 days, according to energy analyst Tom Kloza.

That transit time creates financial risk for traders. The diesel market is in backwardation, meaning immediate prices are higher than prices for future delivery. A company shipping fuel north could see the market fall significantly before the product arrives, potentially erasing the profit on the shipment. At the same time, Gulf Coast suppliers can often earn more by exporting diesel to Europe or Latin America.

“We’re not in an era where there are any U.S. refiners or big U.S. oil companies who would ‘take one for the team’ and bring cargo in where it’s needed,” Kloza said.

International demand has added to the pressure. Europe is a major diesel importer and has been seeking replacement supplies as it reduces its dependence on Russian fuel. Latin American buyers are also competing for U.S. diesel. Waterborne diesel exports from the Gulf Coast reached record levels in April, based on data from analytics firm Vortexa.

The East Coast also has less refining capacity than it did in the past. The number of refineries in the region has fallen by half over the past 15 years, reducing capacity from about 1.64 million barrels per day in 2009 to approximately 818,000 barrels per day today. A major Philadelphia refinery closed after a fire in 2019, while a Newfoundland refinery shut down in 2020.

Refineries that remain in operation are running hard. National refinery utilization reached 93.2%, the highest level since the end of 2019. East Coast utilization reached 97%, the highest since June 2018. However, the region had roughly 1.2 million barrels per day of refining capacity at that time, compared with 818,000 barrels per day today.

East Coast utilization has increased by nearly 13 percentage points in five weeks, but higher utilization alone has not been enough to rebuild inventories. Nationwide, refineries produced 5.137 million barrels per day of distillate, including diesel, the highest level since January 2020. Production of ultra-low sulfur diesel reached 4.875 million barrels per day, up from 4.69 million the previous week and the highest level since August 2020.

For professional drivers and carriers, the immediate concern is the cost of keeping equipment moving. Truckload fleets can generally pass most fuel costs to shippers through surcharge programs, but fuel used on empty and backhaul miles is not typically recovered. Those miles account for roughly 12% to 13% of total miles for many truckload fleets.

That leaves carriers exposed even when surcharge mechanisms are working as designed. Analysts expect some trucking companies to begin reporting diesel-related earnings pressure, particularly if elevated prices persist for several months and fleets must eventually pay to rebuild depleted inventories.

Truck stops have not announced broad diesel purchase restrictions. Pilot Flying J and Love’s said they were monitoring inventory conditions but did not plan to limit purchases. There have also been reports of fuel being moved from the Great Lakes region into the Northeast.

Some signals suggest supplies could improve, including high refinery utilization and rising production. But the region still faces reduced refining capacity, strong domestic and international demand, and a costly supply chain from the Gulf Coast. Until inventories recover, Northeast trucking operations are likely to face continued exposure to high and volatile diesel prices.