Thanks to the SuperGenius policies of the Biden Administration (plus a touch of bad weather), all three of the primary methods by which goods are transported around the nation are under near-term threat:
A union representing about 12,000 rail workers on Monday voted down a tentative contract that was brokered by the White House last month ahead of a possible rail strike.
This vote will force the two sides back to the negotiating table and creates the possibility of a nationwide strike. The potential work stoppage could paralyze the nation’s supply chain and transportation rail service later this fall as the U.S. enters peak holiday season.
Four unions have ratified contracts based on the agreement brokered by the White House, while seven have votes pending on the deal. The eleven unions represent about 115,000 rail workers.
The two largest rail unions — the Brotherhood of Locomotive Engineers Trainmen, or BLET, and the SMART Transportation Division, or SMART-TD, which make up roughly half of all rail workers — are set to finish voting in the middle of next month.
The Brotherhood of Maintenance of Way Employes Division of the Teamsters, or BMWED, rejected the tentative contract due to frustration with compensation and working conditions, particularly a lack of paid sick days, BMWED President Tony Cardell said in a statement on Monday.
The Biden proposal and was widely viewed as a cynical way to delay any rail strike until after midterm elections. That means that most of the wheat harvest will be in, but most corn will still need to be transported. And corn is the largest agricultural commodity shipped by rail.
The crisis gripping the US diesel market is getting out of hand, as demand is surging while supplies remain at the lowest seasonal level for this time of year ever, according to government data released Wednesday.
According to the EIA, the US now has just 25 days of diesel supply, the lowest since 2008; and while inventories are record low, the four-week rolling average of distillates supplied – a proxy for demand – rose to its highest seasonal level since 2007.
In short, record low supply (courtesy of stifling regulations that have led to a historic shortage of refining capacity) meet record high demand. What comes next is, well, ugly (while weekly demand dipped slightly in the latest week, it’s still at highest point in two years amid higher trucking, farming and heating use).
The shortage of the fuel used for heating and trucking and – generally speaking – to keep commerce and freight running, has become a key worry for the Biden administration heading into winter, perhaps even bigger than the price of gas heading into the midterms (well, not really). As Bloomberg’s Javier Blas writes, “such low levels are alarming because diesel is the workhorse of the global economy. It powers trucks and vans, excavators, freight trains and ships. A shortage would mean higher costs for everything from trucking to farming to construction.”
National Economic Council Director Brian Deese told Bloomberg TV Wednesday that that diesel inventories are “unacceptably low” and “all options are on the table” to build supplies and reduce retail prices.
But while the White House claims to be so very concerned about the coming diesel crisis, it is doing absolutely nothing besides draining the SPR which has zero impact on diesel production.
The historic diesel crunch comes just weeks ahead of the midterm elections and will almost certainly drive up prices for consumers who already view inflation and the economy as a top voting issue. Retail prices have been steadily climbing for more than two weeks. At $5.324 a gallon, they’re 50% higher than this time last year, according to AAA data.
For those who might naively suggest “Well, oil refineries should just produce more diesel and less gasoline,” it doesn’t work that way. Though they sit side-by-side in gas pumps, the two fuels come from different points in the fractional distillation column, with Naphtha and Kerosene between them. You can’t just turn a knob to make more of one and less of the other.
The diesel shortage is a direct result of of Democrats refusing to let new refineries be built.
Drought closed a portion of the Mississippi River earlier this week, as the major waterway has been an absolute nightmare for tugboat captains to navigate.
A stretch of the Mississippi River just northeast of Memphis, near Hickman, Kentucky, was closed on Monday because water levels reached record low levels. This caused a logjam of vessels and barges. And it’s the third time a portion of the river has been shuttered in weeks.
We’ve reported dangerously low water levels have left farmers with a barge shortage as freight rates hyperinflate. Some farmers have piled up beans and other crops as logistical pipelines to transport farm goods from the Heartland by barge to export terminals in the US Gulf Coast are paralyzed due to extraordinary conditions on the Mississippi.
Ag blog Delta Farm Press’ senior staff writer Ginger Rowsey spoke with barge captain Eric Badeaux who said it usually takes him 1-2 days to move barges from Morris, Illinois, down the Illinois River to the Mississippi River and on to New Orleans. He’s got over four decades of navigating cargo on the waterways and said because of drought and obstacles, it now takes 8-10 days for the same distance.
“We had been on the boat two weeks and had not even made it to Memphis yet,” Badeaux said. At one point, Badeaux and his crew only traveled 60 miles in four days. They typically average 200 miles per day when heading south.
“In one day, we burned 2,367 gallons of diesel fuel, just sitting here fighting the current,” Badeaux said. “That comes out to about $10,000 in fuel for one day, and we barely moved. Multiply the fuel costs for all of the boats just sitting here, plus all the other costs involved in boat maintenance and you can see why transportation costs are through the roof. It’s disastrous.”
On a recent trip, Rowsey said that Badeaux pulled 20 barges of corn, soybeans, and coiled steel down the river, along with ten empty barges. He said the rapidly dropping water levels make the waterway risky to haul more barges. An average tow usually consists of 30-40 full barges.
There’s no guarantee that all three segments of transportation will hit crisis status at all, much less at the same time. A good bout of rain across the Midwest could ease Mississippi drought conditions. A last minute labor agreement could be reached, avoiding any strikes. And low diesel supplies don’t mean no diesel supplies.
But if all three do hit crisis proportions in late November or early December, it’s quite likely that the holidays will be far from happy…