January 26, 2021

Fueling Solutions in an Era of Uncertainty

As 2020 comes to a close, it seems there are two big questions on everyone’s mind. When will we transition into a post-COVID-19 world? What will things look like then?

“We can’t just wave a magic wand and bring things back to the way they were,” said Chad Besch, energy team leader at MaxYield Cooperative. “While there are a lot of unknowns at this point, we

can assess some factors that could impact the energy industry and the energy solutions we provide.”

In time, when energy demand gets back to pre-COVID levels, fuel prices will likely return to pre-COVID levels, too. “A common theme we hear, however, is that supply is slow to respond to the dramatic drop in demand from the COVID-19 shutdowns,” Besch said.

The coronavirus pandemic caused an unprecedented drop in U.S. traffic. Total miles driven dropped by more than 40 percent in the last two weeks of March 2020, according to data collected by Arity, a data company that tracks transportation trends. In some states, mileage eventually dropped more than 60 percent below what would be expected without a pandemic.

“Even as fuel demand comes back, fuel production could lag,” Besch said. “That means fuel prices could rise faster than expected.”

KEEP YOUR FUEL TANKS FULL

The reason fuel production could lag is because refiners have no incentive to overproduce in a time of uncertainty.

“Refiners are saying ‘prove it to me,’” Besch said. “They won’t make a move until fuel demand comes back and stays back. Also, it’s unclear what kind of investments will be made in the energy industry going forward.”

While there’s always a chance that fuel could become less expensive in the months ahead, there are no guarantees. “I advise you to purchase fuel ahead of time and keep your fuel tanks full,” Besch said. “The carry in the diesel market, for example, tells us it’s likely prices will go up.”

MaxYield’s energy team will continue to monitor the energy markets to provide the solutions you need, when you need them. Contact your local MaxYield energy specialist for more details. We appreciate your business.

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