Macro
US to Sell 1 Million-Barrel Gasoline Reserve Amid Summer Price Surge
Biden Administration to Sell 1 Million-Barrel Gasoline Reserve to Combat Rising Fuel Prices
Key Takeaway
- The Biden administration is selling its 1 million-barrel gasoline reserve to help lower prices during the summer driving season.
- Gasoline futures dropped to $2.4895 a gallon following the announcement, but analysts doubt the sale's significant impact on East Coast prices.
- Bids for the reserve are due by May 28, with delivery expected by June 30, as per Energy Department guidelines.
Biden Administration's Gasoline Reserve Sale
The Biden administration has announced the sale of its 1 million-barrel Northeast Gasoline Supply Reserve, a move aimed at reducing gasoline prices during the peak summer driving season. The sale, which equates to 42 million gallons, was mandated by Congress and is expected to provide some relief to consumers facing rising fuel costs. Gasoline futures responded to the news by hitting a fresh session low of $2.4895 per gallon.
The reserve, authorized in 2014 following the aftermath of Hurricane Sandy, has never been utilized. It is stored in commercial terminals in Maine and New Jersey. The Energy Department's announcement comes as retail gasoline prices have surged approximately 15% this year, with further increases anticipated during the busy summer travel period. Energy Secretary Jennifer Granholm emphasized the strategic timing of the release, stating, "By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state and northeast at a time hardworking Americans need it the most."
Impact on Gasoline Prices
Despite the administration's intentions, analysts are skeptical about the significant impact of the 1 million-barrel release on the East Coast region, which consumed over 3 million barrels of gasoline per day last June. The sale is structured in 100,000-barrel increments, primarily from the Port Reading, N.J. storage site, with some from South Portland, Maine. The Energy Department has set a deadline for bids by 11:00 a.m. Central Time on May 28, with fuel transfers or deliveries to be completed by June 30.
Gasoline prices, currently averaging around $3.60 per gallon nationwide according to the American Automobile Association (AAA), have seen a slight decrease from $3.61 a week ago and $3.67 a month ago. However, the cyclical nature of gasoline prices, influenced by global factors, means that the administration's release may offer only temporary relief.
Political and Economic Context
The decision to sell the reserve comes amid political scrutiny, particularly in an election year where fuel prices are a contentious issue. The Biden administration previously faced criticism from Republicans for releasing oil from the Strategic Petroleum Reserve in 2022, with arguments that such reserves should be preserved for emergencies. The cost of maintaining the gasoline reserve is significantly higher than that of crude oil, at approximately $13 per barrel annually compared to 30 cents per barrel for crude oil in the Strategic Petroleum Reserve.
The sale was ordered by Congress in a government funding bill passed in March. The move is part of broader efforts by the Biden-Harris Administration to address rising fuel costs and provide economic relief to American families during the summer driving season. Granholm reiterated the administration's commitment, stating, "The Biden-Harris Administration is laser-focused on lowering prices at the pump for American families, especially as drivers hit the road for summer driving season."
Management Quotes
- Jennifer Granholm, Energy Secretary:
"By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state and northeast at a time hardworking Americans need it the most."
