(Bloomberg) — Diesel appears scarce heading into the northern hemisphere’s winter and will push fuel prices higher, bedeviling policymakers who are focusing on crude to tame energy inflation, warned Goldman Sachs Group in a note to clients.
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Underinvestment in the nation’s fuelmaking capacity, exacerbated by refinery closures and disruptions, is leading to a shortage of refined products, especially diesel, whose stocks are at “unprecedentedly low levels,” said the bank. Goldman sees an “incredibly challenging” first quarter as the Group of 7 embargo on Russian products goes into effect.
As a result of what it’s describing as a structural shortage of product, Goldman raised its price forecast for gasoline and diesel next year to $4.32 and $5.07 a gallon, respectively, from $3.99 and $5.34. The bank sees gasoline prices higher even as it forecasts demand falling below 2021 levels.
The bank warned that many of the government’s efforts to fight higher energy prices focus on crude and have little impact on fuels, for which consumers actually pay.
“Refining constraints can create a sharp wedge between where crude and product markets clear, making policy management of crude supply less effective at controlling consumer prices,” analysts including Callum Bruce and Roman Langlois wrote in the note.
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