Key Takeaways
In the face of a very active Atlantic hurricane season projected by the government, the Biden Administration is emptying the Northeast gasoline reserve of its entire stock of 1 million barrels.
The Energy Department has admitted the sale is targeted to lower gasoline prices this summer with sales taking place by the end of May and deliveries by the end of June.
The reserve was established by President Obama at the request of Senators Schumer and Markey in 2014 after Superstorm Sandy hit the Northeast in 2012.
The Government Accountability Office found the operation and maintenance costs for the gasoline reserves in New York, Boston and Portland, Maine are over 40 times higher per barrel than the oil reserves in the Strategic Petroleum Reserve as it is much easier to store oil than finished petroleum products.
The Biden administration is defending the action by indicating that Congress ordered the sale in a government funding bill that became law in March.
Selling the gasoline reserves is reminiscent of Biden’s sale of 180 million barrels of the Strategic Petroleum Reserve’s oil before the mid-term election in 2022 when gasoline prices were $5 a gallon.
President Biden plans to manipulate fuel prices by selling one million barrels of gasoline from an emergency reserve in New England before this summer’s driving season and prior to the November election. The reserve was authorized in 2014 by President Obama, two years after Hurricane Sandy damaged refineries and left terminals underwater leading some gas stations in New York to go without fuel for as long as 30 days. The reserve was insisted upon by Senators Chuck Schumer of New York and Edward Markey of Massachusetts. Biden’s Energy Department admitted that the sale of the Northeast Gasoline Supply Reserve, equal to 42 million gallons, was timed to help lower gasoline prices during the summer driving season. Retail gasoline prices are up about 15 percent this year due to Biden’s energy policies, and some experts have warned that costs could keep climbing during the busy summer travel season. The Biden administration is defending the action by indicating that Congress ordered the sale in a government funding bill that became law in March. The announcement coincides with the government predicting an above average hurricane season.
The product reserves cost about $13 per barrel on an annual basis for operations and maintenance, compared with roughly 30 cents a barrel for oil stored in the Energy Department’s Strategic Petroleum Reserve, according to a 2022 report by the Government Accountability Office. Gasoline is a refined product which unlike crude oil breaks down in storage and requires replenishing, which accounts for part of the higher costs. Bids for the solicitation are due by 11:00 a.m. Central Time on May 28. The fuel will be transferred or delivered no later than June 30, ensuring ample supply before the July 4th holiday, according to the Energy Department (DOE). The gasoline will be sold in increments of 100,000 barrels to encourage competitive bidding among retailers and terminal operators. The DOE has designated storage sites in Port Reading, New Jersey (900,000 barrels), and South Portland, Maine (98,824 barrels) for this release.
The East Coast region consumed more than 3 million barrels a day of gasoline last June so it is unclear how much gasoline prices will be lowered by an additional 1 million barrels on the market. But, some have argued that it would leave the region vulnerable to a supply disruption from a cyberattack on a pipeline, as happened in the southeast in 2021, and that the DOE had failed to produce an alternative for future disasters. In its October 2023 report, DOE noted that the reserve had never been used and would provide “minimal relief to a shortage condition,” and cost around $16 million a year to maintain. The reserve holds one million barrels of gasoline, including 700,000 barrels located in the New York Harbor area, 200,000 barrels in the Boston area, and 100,000 barrels in South Portland, Maine.
Gasoline prices recently averaged about $3.60 per gallon nationwide, up 6 cents from a year ago, but are slowly climbing. Tapping gasoline reserves is one of the few actions a president can take by himself to control fuel prices, which are an election year liability for the party in control of the White House.
The Action is Reminiscent of Biden’s Emergency Oil Sales
Biden significantly drained the Strategic Petroleum Reserve (SPR) in 2022 just before the mid-term election when gasoline prices had reached over $5 a gallon, dropping the emergency reserve to its lowest level since the 1980s. That election year sale helped lower gasoline prices to below $4 a gallon, which is often thought as the point where voters will turn their allegiance to the other party during an election. While the Biden administration has since begun slowly refilling the oil reserve, it only intends to refill a small portion of the oil it sold, using the cancellation of planned long-term sales by Congress as justification. Congress had scheduled long-term sales for budget reduction purposes, but Biden’s abuse of the system for political purposes led to a cancellation of those sales. SPR currently holds 367 million barrels of oil, about half of what it held in 2009 (727 million barrels), and down from almost 600 million at the start of 2022.
Conclusion
DOE established the Northeast Gasoline Supply Reserve—the first federal, regional, refined petroleum product reserve containing gasoline—in 2014 upon President Obama’s orders following the 2012 Superstorm Sandy that hit the northeastern United States. To lower gasoline prices before the July 4 holiday and prior to the November Presidential election, the Biden administration plans to sell a million barrels from the storage sites in the Northeast. Because the gasoline reserve has never been used, Congress had required the closure of those sites by the end of September. The timing, however, looks similar to Biden’s sale of oil from the Strategic Petroleum Reserve in 2022 that lowered oil prices, which lowered gasoline prices, just before the mid-term election.
