DIESEL FUEL SUPPLY IS CRITICALLY LOW; PRICES UP SHARPLY (Published 1979) (2024)

The supply of diesel fuel, which powers much of the surface transportation equipment used in the United States, has fallen sharply. And prices, like those of gasoline, are skyrocketing.

The shortage is so critical that the Department of Energy has started to establish a hierarchy of priority uses. Some Congressmen and transportation executives are advocating reinstitution of the allocation system, which was abandoned in 1976 when price controls were lifted on diesel fuel and heating oil.

Trucking companies, railroads, bus lines and barge companies — all of which need diesel fuel — are predicting that agricultural produce may rot in the fields, that thousands of passengers may be stranded, that some industrial production may be lost, that supplies of coal and oil may not be able to move and that layoffs will mount if corrective action is not taken soon. Some experts do not believe the situation is that serious, but many agree with users who charge that the oil companies are making a difficult situation worse.

‘Much Tighter Than Gasoline’

“Right now diesel fuel is much tighter than gasoline,” says Arthur Imperatore, chairman of the A‐P‐A Transport Corporation, an interstate common carrier based in North. Bergen, N. J. A railroad industry spokesman said, “If the situation doesn't improve we'll eventually have to decide whose goods get moved and whose don't.”

Meanwhile, members of Congress urged President Carter to prove to the nation that there is a shortage of gasoline and oil and the Energy Department prepared regulations to encourage heating oil imports. [Page D1.]

In the last few weeks the oil companies have cut back their shipments of diesel fuel to 55 to 85 percent of levels a year ago. Earlier this week the Getty Oil Company halted all diesel sales in the Middle West and the Phillips Petroleum Company said it would cut allotments to customers by 40 percent. Major producers, like Exxon and Mobil, say their current diesel allotments are at 85 percent of last year's consumption. At the same time, prices have risen from about 55 cents a gallon to 75 cents and higher.

The supply situation is uneven around the country. The West Coast and the Middle West are the biggest problem areas, while New England appears least affected.

Most of the shortage, transportation executives say, is caused by a shortage of crude oil, particularly light crude. On average, about 22 percent of a barrel of light crude comes out of the refinery as fuel suitable for home‐heating or diesel fuel. The balance is refined into gasoline and other fuels.

Relied on Less Expensive Oil

But that percentage drops as heavier crudes are used. Since the beginning of the supply problems in the Middle East, refineries in the United States have relied more heavily on the less expensive heavy oil, particularly the crude from Alaska's North Slope.

The Carter Administration's decision, announced yesterday, to import more crude is expected to help ease the shortage. But any relief, experts believe, is still months away.

Government regulation has had a hand in producing the shortage. The Department of Energy has asked the oil companies to build up their stocks of distillates (the refined oil used for heating and diesel fuel) to 290 million barrels by the end of the summer to avoid a shortage in the fall. Stocks are now about 115 million barrels, compared with 133 million last year. The effort to build these stocks has meant that very little of the inventories can be drawn down to alleviate the diesel shortage.

Refinery problems, including maintenance work and emphasis on gasoline production, have also helped to produce the diesel shortage.

In addition, demand for the fuel has increased. The National Association of Truck Stop Operators says that demand at truck stops was up 13 percent in the first quarter.

This increased demand stems, in part, from a growing fascination by American car buyers with diesel engines. Diesel fuel is generally cheaper than gasoline because it is simpler to refine, and the diesel engines, which ignite fuel with the heat of compressed air instead of sparks, burn less fuel per mile than gasoline engines.

Last month motorists in the United States purchased 22,552 diesels, more than three times the number bought a year earlier. Dealers, who have dubbed the phenomenon “diesel. mania,” are running into supply problems and some are selling the cars at large premiums above the list prices.

Yet another Government rule has produced predictions of a worsening diesel fuel shortage for transportation companies. Two weeks ago the Energy Department decreed that farmers should be able to get 100 percent of their tractors' needs during the spring planting season. Both Getty and Phillips cited the new rule when they announced their allotment cuts.

“If you have to sell to agricultural users first, there's no sense in selling to customers who don't meet the certification,” a Getty spokesman said. “Our supplies are just that tight.”

The rule has outraged the transportation companies. The American Association of Railroads says that supplies are extremely tight on the Chicago & Northwestern Railway and the Burlington Northern, with some companies dipping into their inventories with slim prospects of getting replacement supplies. But a spokesman for the Burlington said: “The problem is not crucial yet. If you can purchase at today's prices you can get fuel.”

Allocation System Urged

The American Trucking Association, the waterway operators, the American Bus Association and the American Public Transit Association have all said that the rule giving priority to the farmers and to the Department of Defense would exacerbate shortages in their industries. And a group of Congressmen from the Gulf Coast area has suggested that Congress reimpose diesel allocations to prevent diesel‐using drilling rigs from shutting down.

The Energy Department has suggested that, in a serious situation, the oil companies revert to the priorities that existed under the price control laws. Under those pre‐1976 guidelines the priority for diesel fuel went first to the agricultural sector and the Defense Department.

Like the gasoline shortage, the diesel shortfall has produced its share of skeptics. Conspiracy theories abound, coming mostly from executives who asked not to be quoted. Some say that the oil companies are involved in a tugof‐war with the Government, trying to demonstrate the contradictions of Federal policies. Other say the aim is to drive the price up to $1.25 a gallon. And some truck‐stop owners expressed fears that oil companies are trying to push them into bankruptcy and take over their businesses.