Santa runs on diesel: Hidden strain on holiday logistics, energy

As the holiday season ramps up, the global economy’s reliance on diesel reaches a critical point, with logistics systems stretched thin and supply chains vulnerable. While Christmas is a time of cheer for consumers, it's a period of maximum stress for the diesel markets, exposing the fragility of energy systems that power everything from trucking to refrigeration.

Every December, the surge in holiday logistics sends the global diesel market into overdrive, highlighting its critical role in the world’s economy, according to opinion piece by Oilprice.com.

From parcel delivery to cold-chain logistics and last-mile services, diesel fuels the backbone of the holiday economy. However, this demand peaks during the same time that inventory levels are low, creating a perfect storm of logistical and supply chain vulnerabilities.

In the US, distillate demand spikes as freight activity surges, peaking just as stocks are drawn down. According to the US Energy Information Administration (EIA), commercial distillate stocks have remained consistently below historical averages in late December, leaving little room for error in the system. Diesel supply is close to 4 million barrels per day, near the highest post-pandemic levels, yet the system remains tight as inventories hover around 110 to 115 million barrels.

Europe’s situation is even more precarious, the article says. After the loss of Russian diesel flows, the region has relied heavily on long-haul imports from the US, Middle East, and India. However, the impact of December freight demand always erodes whatever buffer remains. Supply looks sufficient on paper, but in practice, delays and disruptions are amplified by the extended distance and competition for shipping capacity.

“Christmas matters because diesel demand during this period is not responding to price. Parcel delivery, food distribution, cold-chain logistics, and retail restocking all scale simultaneously,” states the op-ed.

Unlike gasoline, where demand can soften based on consumer sentiment, diesel demand is locked in by calendar and contractual obligations. Missed deliveries or delays lead to lost sales, spoiled goods, and damage to a company’s reputation.

The impact of this strain is also evident in the behaviour of refinery operations. US Gulf Coast refiners are often running at high utilisation rates in late Q4 to prioritise diesel production, even as gasoline margins slump. This reduces flexibility in the system, leaving little room for adjustment when disruptions occur, whether from bad weather, equipment failures, or other unforeseen events.

Exports further complicate matters. The US has become Europe’s key diesel supplier, but any disruptions in the export chain—whether from weather or port congestion—are felt acutely during the holiday rush. These risks are especially pronounced when European inventories are already low, and the continent has limited flexibility in managing shortages.

“Any disruption along the export chain during this window, whether it’s fog in the Houston Ship Channel to Atlantic storms or congestion in Northwest European ports, happens when European buyers have the least flexibility and inventories are already drawn,” the piece notes.

The complexities of the holiday season also expose the vulnerabilities in the transition to electrification. While urban delivery and short-haul fleets have made strides in adopting electric vehicles (EVs), the winter months reveal the limitations of these alternatives. Cold weather diminishes battery performance, charging infrastructure becomes congested, and the surge in holiday volumes forces fleets to rely on diesel despite their efforts to electrify.

By Sabina Mammadli