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Diesel thieves strike as premium price over gasoline widens

A South Dakota farmer lost about $500 worth of diesel fuel when his truck was vandalized, an indication of the value of the commodity. Demand for diesel, which typically rises in the fall, and the Russian invasion of Ukraine are part of why diesel is commanding a premium to gasoline.

A gas station with Farmers Union Oil Co. signs and prices for gas and diesel.
No. 2 diesel at Farmers Union Oil in Medina, North Dakota, had dropped to $4.79 per gallon by Nov. 30, 2022. It had been over $5 days earlier. No.1 diesel, used in wintertime, costs more. Some stations in the region remained over $5 for No. 2 diesel, with a wide range between diesel and gas prices.
Jenny Schlecht / Agweek
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David Nelson figured it was probably coyotes that had his three dogs barking and howling on a recent Saturday night at his farm near Yankton, South Dakota.

But after getting a whiff of fuel, he discovered that the fuel tank on his truck had been drilled into.

“I just walk around and I can see something laying underneath the truck, a fuel spout and a cap from a fuel jug,” Nelson said. Then he saw metal filings on the ground and hole drilled a few inches above the bottom of the tank. “They must have been sitting there trying to catch some fuel.”

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A hole was drilled in the tank of one of David Nelson's trucks at his farm near Yankton, South Dakota. Nelson said he figures he lost about $500 worth of diesel fuel.
Courtesy of David Nelson

He’s not sure how much diesel the vandals were able to get away with, but he figures he lost about 100 gallons. At about $5 a gallon, that’s about a $500 hit — plus the cost to repair or replace the fuel tank.

Diesel fuel has become a precious commodity, with talk of shortages and prices that went over $5 a gallon in the upper Midwest. The price for any kind of fuel has been volatile in 2022, but the spread in price between diesel and gasoline widened dramatically in 2022, as much as $1.50 per gallon for the week ending Nov. 28.

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The price of diesel in Nelson’s area had dropped some since he had filled up the truck that got vandalized, but the national average as of Nov. 28 was still $5.14 per gallon.

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David Ripplinger, North Dakota State University, associate professor
Evan Girtz / Agweek

David Ripplinger, an associate professor at North Dakota State University who specializes in energy, says as fuel prices spiked earlier in the year, gas users put it in park, while diesel users kept on truckin'.

He said when a barrel of oil is refined, a certain amount comes out as gas and the rest as diesel. When demand for one changes quickly, the price spread can get out of whack.

“It’s that ratio, that idea that you're putting that barrel through and that diesel’s in high demand but the gasoline really isn't, so you're not getting the signal everybody wants more of everything,” Ripplinger said.

Something that would help would be a mild winter, especially in the northeastern United States, where more homes use heating oil, which is similar to diesel

While domestic supply and demand is a factor, so is the global market, which has seen some dramatic shifts since the Russian invasion of Ukraine in the spring.

Veronica Nigh, an economist for the American Farm Bureau Federation, said while the U.S. imports very little crude oil from Russia, it does import a more substantial amount of other petroleum products, or “unfinished oils” that can go into diesel production.

“So the U.S., as with a lot of other countries, put sanctions on Russia, particularly on its oil products,” Nigh said. “When the US banned imports of oil from from Russia, we talked a lot about the fact that Russia was only about 3% of our petroleum supplies, which is true, but it's also about 20% of petroleum products, supplies, which petroleum products are just more refined products typically used in the United States in diesel production.”

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That meant that U.S. diesel production was impacted at a much deeper level than gasoline production.

She also notes that since 2019, diesel production capacity has dropped by about 180,000 barrels per day — about 4% of current diesel production.

The diesel premium, which had been about 25 cents per gallon, shot up.

Nigh said that in the fall, demand for gas often dips with the end of summer travel; demand for diesel goes up with farmers harvesting, home heating kicking in and holiday shopping increasing deliveries to stores and consumers.

There were some ominous national headlines early in the fall about how the U.S. only had 28 days of diesel left on hand.

“And, you know, it did cause a little panic,” Nigh said.

But refiners make diesel every day. And she said some refiners that were down temporarily for routine maintenance are back online.

“We were down about 17% (of diesel supply) nationally compared to where we were at the same time the year before,” Nigh said on Nov. 30. “Things have improved some in the month or so since those first headlines broke and today we're down about 11% compared to where we were at the same point last year.”

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While $500 in lost fuel isn’t going to break Nelson, it’s another jab at an operation that has been taking a beating from Mother Nature.

Nelson, who grows corn, soybeans and hay and feeds cattle, said he has only been able to get two cuttings of hay each of the last two growing seasons because of dry weather. A normal year would produce four cuttings.

A truck that he was using to haul hay was leaking radiator fluid — he would have liked to use the truck that got vandalized, but it hadn’t been fixed yet.

“It’s bad enough trying to keep everything else running and then this happens,” he said.

Reach Jeff Beach at jbeach@agweek.com or call 701-451-5651 (work) or 859-420-1177.
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