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Diesel shortage War economy and chaos at the refineries

2022-06-02 | Global News

In the USA, there is talk of a fuel shortage -especially diesel- worse than that of the 1970s crisis, while countries like Sri Lanka are receiving large shipments of diesel -in this case from India- to make up for a shortage that is already paralyzing the productive apparatus. Diesel stocks are running out all over the world, not only as a result of the lack of adaptability of the chains in the face of unexpected changes - as is the case in the semiconductor sector - but also as a direct consequence of the breakdown of the world productive structure that began with the trade war and has accelerated with the open war in Ukraine.

Act I: Fertilizers

Ammonia production plant in Russia

Ammonia production plant in Russia

In principle, there is no lack of manufacturing capacity. The shortage of diesel is a result of the crisis and the tearing apart of the world's productive structure at all levels. A lot of refineries are shut down around the world and refineries in the USA, China and Russia are below their maximum capacity due to sanctions on the one hand and export restrictions on the other. In fact, the diesel shortage is a ramification of the global natural gas crisis.

The first act already started last year and has been escalating to borderline situations in the semi-colonial countries. It concerns another branch of the chemical industry dependent on natural gas: fertilizers. Fertilizer production has always been ultra-concentrated in countries with concentrated capital and there have been supply difficulties with some regularity, but turning off the gas tap has seriously worsened the situation. In several countries, Peru for instance, the danger of famine is mounting because of the shortage of nitrogen fertilizers and its effect on agricultural production.

Read also: Food security and war economy, 3/14/2022

The effects have been spiraling upward. Coal and gas shortages in China impacted India and South Korea, from transportation to fertilizer, adding to already high natural gas prices since late last year that made it more expensive or difficult to produce hydrogen from natural gas. Hydrogen has been recently on everyone's lips because of the Green Deal, but it has been central to the chemical industry for a century: no hydrogen means no fertilizers and no diesel.

And not only fertilizers themselves were affected; there had already been shortages last November and December of other products that depend on hydrogen, such as urea, which is used as a diesel additive and caused problems for the logistics industry even before the price of diesel skyrocketed.

Act II: chaos in the refineries

Hydrodesulfurization unit in a refinery which removes sulfur from diesel using hydrogen.

Hydrodesulfurization unit in a refinery which removes sulfur from diesel using hydrogen.

The trade war and the Green Deal put the productive capacity of the global chemical industry on the ropes. It was no great drama for the capital invested, as profits grew as never before. A real preview of what was intended.

But the open war in Ukraine has broken the interconnections and disabled or put a multitude of refineries at risk. Although in Europe all the focus is on Schwedt refinery in Germany because of its Russian ownership and because it supplies the whole of Berlin and Brandenburg, the new European blockade on Russian oil will put many refineries in Europe out of service.

For starters, it will directly affect another refinery in Germany owned by France's Total. The sanctions are affecting a whole string of Russian refineries from Bulgaria to Sicily as well.

The properties of oil change according to its reservoirs of origin which means that a refinery's processes have to be reorganized when switching suppliers, an investment that the Russian owners are not inclined to make considering that they are under threat of being expropriated by European states.

Workers, as always, are attacked from all sides in the bloc-forming movement. This is not the first time it has happened in places like Schwedt, where a good part of the workers were laid off when the USSR collapsed. Now they face a new forced industrial decoupling:

"We need Russian oil. We have our homes, our families. If (the government) wants to stop it, then the area here will be dead," Thorsten Scheer, 60, told AFP at the refinery in the town of Schwedt, on the border with Poland. ‎...‎

But employees accused ‎the German economy minister‎ of serving US interests by trying to drive a wedge between Germany and Russia.

"Yes, the war is garbage. That's perfectly clear to us," one worker told the crowd.

Toward gasoline shortages

Schematic of a refinery, cf. all hydrotreaters and cracking units relying on hydrogen

Schematic of a refinery, cf. all hydrotreaters and cracking units relying on hydrogen

To the same degree as hydrogen is an essential intermediate in the fertilizer industry, it is also an essential intermediate in the petrochemical industry.

Hydrogen is used to control the size and branching of hydrocarbon chains to make high-octane gasolines (although alternative methods exist), jet fuel and, more crucially, to remove sulfur from diesel by converting it to the famous rotten egg gas (H2S). This last step is really vital and depends on the supply of natural gas to the refineries... a supply that has collapsed.

To increase diesel production, refineries are reducing the use of hydrogen in non-diesel hydrotreaters, which portends a gasoline crisis in the near future.

The new normality of shortages and its consequences for workers

Gas station in the USA

Gas station in the USA

If diesel is becoming scarce in the most capitalized countries, all fuels are already in short supply in semi-colonial countries such as Nigeria, whose four refineries have been shut down for months. Sri Lanka's only refinery has been shut down since March, and can only now be partially reopened thanks to a shipment of Russian oil in the midst of a political and fuel crisis.

Even in periods of "normality", world fuel production never reached a large part of the world... certainly not because of a real shortage of raw materials. There was never any hesitation in diverting production to the plastics industry rather than ensuring that food arrived at affordable transport prices for millions of Africans.

In fact, refineries in the most powerful national capital countries such as the USA have been quick to profit from the new situation, increasing the difference between the cost of a barrel of crude oil and the prices of finished products by $10 this first quarter.

Read also: Plastic: a 100% capitalist problem

The current diesel and fertilizer crisis is neither unexpected nor surprising. It is both conjunctural and structural. And one thing is clear: shortages will become more acute as the world's productive structure breaks down. The results are far from being fully realized.

1 The countries with the strongest national capitals are entering a "new normality" under conditions permanently experienced by the semicolonial countries during the "good times". It is the result of militaristic profligacy and the destruction of productive capacities brought about by tearing up the world market. What we are seeing in chips, basic food and fuels, will irremediably occur in all fields. And the foreseeable response will be a tightening of war economy conditions, and an acceleration of imperialist warmongering as already hinted at with wheat.

Read also: Will the EU send warships to take wheat out of Ukraine, 30/5/2022

2 And if these will be the effects on the states linked to the big national capitals, in the states of weaker capitals the results will become grotesque.

Lavrov can spout all the bravado he wants and shout from the rooftops that "Russia has enough customers, let the West pay more dearly". But it is not "the West", i.e. capital and the bourgeoisie of the NATO countries, which in the end suffers the most serious results of the shortages, but the workers of the semicolonial countries.

The response of the bourgeoisies of the peripheral countries will be neither less outwardly imperialist nor less inwardly totalitarian and violent. In fact, as we already see from Sri Lanka to Tunisia, there will be no shortage of state brutality to contain and suppress the workers.

That is to say, the acceleration of capitalist contradictions, increasingly simultaneous throughout the world, will heighten the imperialist contradictions between all states and between the system itself in each place and the workers it exploits. The "new normality" consolidated by the war in Ukraine is increasingly articulated in two poles: generalized war and class war. From the first we can only expect a barbaric spiral; from the second, the only real historical option of a future for Humanity.