Diesel Demand Drop Signals Recession: US, China and Europe Hit as Economies Falter

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Demand for diesel, which drives everything from commercial trucking fleets to construction equipment, is dwindling in several of the world’s greatest economies. According to S&P Global, diesel consumption in the United States is predicted to fall by 2% in 2023, excluding 2020. This decline in demand is considered as an early indicator of weaker industrial output and lower consumer spending, with the downturn fueling fears about an impending recession. Similar tendencies may be seen in other regions of the world, such as Europe and China. Much of the decline in diesel consumption may be attributed to transportation, which consumes around 60% of fuel in China and more than 70% in the United States.

China’s Commercial Diesel Inventories Increase

The retreat comes as China’s industrial activity unexpectedly slowed in March, causing factory gauges across Asia to fall. According to OilChem statistics, commercial diesel stocks countrywide excluding state refineries reached an eight-month high in early April. Demand is also weakening in the region’s emerging countries, notably Indonesia, as expansion slows.

US Diesel Is Not Immune to Recessions

The reduction in US diesel consumption will be most noticeable on the West Coast, where significant tech layoffs and an impending banking crisis have put the region in financial jeopardy. According to S&P’s director of Americas fuels and refining, diesel consumption will fall 5% this year, more than double the national average. US container imports, a leading indicator of fuel use from the vehicles and trains that transport them, are also under pressure. Inbound cargo to Los Angeles are at their lowest level since March 2020.

China will need to rely on domestic consumption to support manufacturing activities.

“With global economic headwinds, especially in the West, China will need to rely on domestic consumption to support its manufacturing activities,” said Mia Geng, head of China oil service at industry consultancy FGE. According to figures compiled by China’s Ministry of Transport, China’s container throughput at key ports declined 5% in the week ending April 9. Diesel prices have fallen due to a decline in demand in China and throughout the world, amid worries that many of the world’s largest economies face difficult times ahead. Economists predict a 65% possibility of a US recession and a 49% risk of a European recession during the next year.

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Yustika Kusuma Putri, she is social media marketer from Indonesia. I currently work as a Media Manager in Technologie Omicrom Sendas inc.
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