What is happening to the supply of diesel in the Kingdom? On the face of it, we have so little of this fuel that farmers are complaining their yields are dropping and truckers are claiming it its now difficult to operate their vehicles.
Saudi Aramco is being blamed, variously for making inadequate supplies available or, as some farmers maintain, for wanting to bump up the cost which will jeopardize delicately balanced agricultural economics. Inevitably, however, there is more to this issue than first meets the eye.
Aramco may indeed be partly responsible, but there are other factors at play. One is the issue of smuggling. As this paper reported in May, ten road tankers with Jordanian plates were seized in Riyadh, fully loaded with diesel. This came at a time when the capital was experiencing diesel fuel shortages. The problem for transport companies has, the truckers claim, been compounded by the ban on trucks moving through Riyadh in daylight hours. However, unless this is affecting the diesel delivery schedules to gas stations, it is hard to see how the limitation of truck movements can be having an impact on supplies.
What does seem clear is that there has been a breakdown in the seasonal diesel stockpiling. Only a small number of large power stations are powered by diesel fuel but smaller generators are widespread, especially in farming districts. With the arrival of high summer temperatures, the power demand rises significantly, not least because of the increased use of air-conditioning. It is being suggested that this year there has been a surge in diesel smuggling, which has depleted stocks that ought to have been available here in the Kingdom. If this is indeed the case, the authorities must continue their crackdown on this lucrative illegal trade by imposing penalties that will make the criminals think twice about continuing with their activities. And it must be said that smugglers would not be able to function unless there were Saudi traders willing to sell them diesel fuel in the first place. These individuals should also feel the full force of the law so that they will stop damaging Saudi interests.
And it is not just farmers and truckers who are suffering from the shortage. Bakers, who play such an important role during Ramadan, have been told by the Ministry of Municipal Affairs to switch from diesel to gasoline generators. Not only is this a considerable capital cost but it impacts strongly on the economics of bakery businesses, because the cost of gasoline is twice that of diesel. It does not seem fair to make this demand when the real problem lies in an inadequate supply of a basic fuel.
The Kingdom imports a proportion of its diesel fuel but moves are underway to boost the output from local refineries. More importantly, this increased production is going to be of much less polluting diesel. In May, Aramco brought on stream the largest diesel hydrotreater in the Kingdom, able to produce 105,000 bpd of ultra low sulfur fuel. Clearly we need more of the same, and as soon as possible. This summer’s damaging shortages must not be repeated.