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Germany’s Diesel Situation Just Got Worse

A German oil refinery will halt shipments of diesel—the lifeblood of the economy—and heating oil to customers starting tomorrow, according to Bloomberg sources.

German oil refinery Bayernoil GmbH said it would halt deliveries for several days after suffering a lightning strike. The EU already has several refinery outages to contend with this month, including Austrian OMV’s Schwechat refinery, UK’s Fawley refinery, France’s Donges refinery, and Romania’s Rompetrol. OMV’s Burghausen refinery is also due to undergo maintenance yet this summer.

The Schwechat refinery outage had already caused truck queuing at the Bayernoil refinery over the last couple days. Now this source, too, has become unexpectedly unavailable.

The two plants affected by the lightning strike are capable of processing 200,000 bpd of crude oil, according to Bloomberg data.

European diesel prices have hit record prices on recent tight supplies, with distillate inventories—a category that includes diesel--sitting at historic lows.

Spare refining capacity to produce distillates is shrinking as demand continues to rebound in the post-pandemic world, and refining capacity in Europe—and in the United States—has fallen over the last ten years.

The only escape from the diesel crunch is a slowdown in demand on much higher prices, or an increase in refining activity. Bayernoil GmbH’s lightning strike and other refinery outages diminish the likelihood of the latter, at least in the near future.

Prior to Russia’s invasion of Ukraine, Russian supplies accounted for 15% of Europe’s total diesel consumption.

Germany lowered its taxes on diesel fuel by 17 cents at the beginning of this month to curb the high price for end users, but critics of the reduction argue that it has failed to bring down prices.

By Julianne Geiger for Oilprice.com

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