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Page added on April 30, 2008

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World power crunch tightening diesel market

NEW YORK (Reuters) – Rising electricity demand, aging power infrastructure and fuel shortages in developing countries are boosting global demand for diesel — factors that could keep supplies tight and prices strong for another couple of years.

The boom in use of diesel for electric generators in parts of Asia, Africa, the Middle East and Latin America has already underpinned a big rally in distillate prices since last year and helped propel crude oil well above $100 a barrel even as energy demand wanes in the United States and Europe.

“You have a shortage of power generation capacity in parts of the world, including the Middle East, causing brown outs and blacks outs, and increasing incremental demand from back-up generators that run on diesel,” said Antoine Halff, oil analyst for Newedge Group in New York.

Shortages of natural gas in Chile and Argentina, a power crunch in South Africa, along with rising fuel demand in China and the Middle East are the key drivers of the distillate boom — piling on top of already robust diesel use in Europe for automobiles, experts said.


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