Joe Biden is releasing one million barrels of gasoline from the Northeast Gasoline Supply Reserve in a bid to reduce prices as summer driving season begins (and the November presidential election draws nearer.) The timing is similar to Biden’s a 2022 sale of millions of barrels of oil from the nation’s Strategic Petroleum reserve that sought to drive down prices before that year’s midterm elections that has left the reserves dangerously low with Biden slow-walking efforts to refill it.
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As TGP reported last month, gasoline prices were up 18 percent this year.
Last Friday the Energy Department announced the awarding of contracts to buy 3.3 million barrels of oil in October at an average price of $79.38 (excerpt):
…the U.S. Department of Energy’s (DOE) Office of Petroleum Reserves announced that contracts have been awarded for the acquisition of 3.3 million barrels of U.S.-produced crude oil for the Strategic Petroleum Reserve (SPR). The contracts awarded today represent a fully subscribed solicitation for October delivery following the Request for Proposal (RFP) that was announced on May 7, 2024. The 3.3 million barrels are being purchased for an average price of $79.38, well below the average of about $95 per barrel that SPR crude was sold for in 2022, securing a good deal for taxpayers. To date, DOE has purchased a total of 35.6 million barrels of oil for the SPR for an average price of $77.18 as well as accelerated nearly 4 million barrels of exchange returns, pursuant to its strategy to refill the SPR. DOE will continue to evaluate options to refill the SPR while securing a good deal for taxpayers, taking into account planned exchange returns and market developments.
Forbes posted an analysis this month of Biden’s efforts to refill the SPR (excerpt):
…To recap, the SPR is maintained by the U.S. Department of Energy, and its oil stocks are stored in huge underground salt caverns at four sites along the coastline of the Gulf of Mexico. The size of the SPR (authorized storage capacity of 714 million barrels) makes it a significant deterrent to oil import cutoffs and a key tool in foreign policy.
After Russia invaded Ukraine, the Biden Administration made the largest withdrawal in SPR history in an effort to curb the oil price spikes that happened in the wake of the invasion. Between Biden’s inauguration in 2021 and mid-2023, 291 million barrels were sold from the SPR. That 46% reduction took SPR volumes to a level last seen in 1983.
Since hitting a low level of 347 million barrels in June 2023, the Biden Administration has returned about 14 million barrels of the 291 million removed (4.8%).
Tuesday’s DOE press release in full:
U.S. Department of Energy Announces Sale of Northeast Gasoline Supply Reserve as Americans Hit the Road for Summer Driving Season
MAY 21, 2024
WASHINGTON, D.C.— Today, the U.S. Department of Energy’s (DOE) Office of Petroleum Reserves announced a solicitation for the sale and liquidation of 1 million barrels (42 million gallons) of gasoline in the Northeast Gasoline Supply Reserve (NGSR). This solicitation is strategically timed and structured to maximize its impact on gasoline prices, helping to lower prices at the pump as Americans hit the road this summer.
“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,” said U.S. Secretary of Energy Jennifer M. Granholm. “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.”
The awarded entities, likely made up of retailers and terminals, from this sale will have the fuel transferred or delivered no later than June 30, 2024, just in time for the July 4 holiday. In 2024, in accordance with the Consolidated Appropriations Act, DOE will sell close to 1 million barrels of gasoline from the following NGSR storage sites:
Port Reading, NJ (900,000 bbl)
South Portland, ME (98,824 bbl)
The volumes will be allocated in quantities of 100,000 barrels. This approach will ensure a competitive bidding process that both fuel retailers and terminal holders can participate in – ensuring this product can flow into local retailers ahead of the Fourth of July 4 holiday and that it will be sold at competitive prices, helping lower costs for American families and consumers.
Bids for the solicitation are due no later than 11:00 a.m. Central Time on May 28, 2024. Revenues from the sale will be deposited to the Treasury.
The sale of this Government controlled stock will release nearly 1 million barrels (42 million gallons) of gasoline blendstock into the commercial market for use at their discretion. Contracts resulting from this sale shall be subject to contract price adjustment as set forth in the Supplements and Amendments to the Standard Sales Provisions (SSP).
This Notice of Sale contains the terms and conditions of the sale and specific instructions for preparation and submittal of offers.
For more information on the NGSR please visit the NGSR website.
The Northeast Gasoline Supply reserve was set up by the Obama administration in 2014 after Superstorm Sandy devastated the northeast in 2012.
Congress mandated the reserve be sold off and closed as part of a budget deal this year. The AP reports an analyst saying the gasoline reserve made little sense to begin with (excerpt):
…The move, which the department said is intended to help “lower costs for American families and consumers,″ follows a mandate from Congress to sell off the 10-year-old Northeast reserve and then close it. The language was included in a spending deal Congress approved in March to avert a partial government shutdown.
…Congressional Republicans have long criticized the Northeast reserve, which was established by former President Barack Obama, saying any such stockpile should have been created by Congress. A 2022 report by the Government Accountability Office said the gasoline reserve, which has never been tapped, would provide minimal relief during a severe shortage. The reserve costs about $19 million a year to maintain.
Patrick De Haan, an analyst for GasBuddy, said sale of the Northeast reserve would have little impact on gasoline prices nationally, although there “may be a slight downward pressure on prices” in the Northeast. The million-barrel reserve only amounts to about 2.7 hours of total U.S. gasoline consumption, he said.
“As an analyst, this reserve never really made a whole lot of sense to have,’’ De Haan said in an Associated Press interview. The reserve is very small and must be frequently rotated, “because gasoline has a shelf life,’’ De Haan said. “That’s why there’s really no nation that has an emergency stockpile of gasoline’’ other than the U.S.
The Strategic Petroleum Reserve has vastly more quantities of oil needed in an emergency, he said.
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