Source: Golden Ten Data
The Ministry of Energy said that the current release of reserves is to maximize the impact on oil prices this summer.
The Biden administration will release 1 million barrels of gasoline from Northeast gasoline supply reserves to lower fuel prices before the July 4 Independence Day holiday and summer driving season.
Energy Secretary Jennifer Granholm said in a statement on Tuesday: “By strategically releasing this reserve between Memorial Day (May 30) and July 4, we will ensure that the tri-state region and the Northeast are provided with sufficient supply when hardworking Americans need it most.”
US gasoline futures have risen 19% this year because oil prices have risen due to OPEC production cuts, and people are worried that the war between Israel and Hamas may trigger a wider conflict in the Middle East, thereby disrupting supply. In April, rising energy prices sparked speculation that the Biden administration might use Texas and Louisiana's strategic oil reserves (SPR) before the November presidential election.
Brainard, the White House's national economic adviser and former “second-in-command” of the Federal Reserve, said last month that the government will “ensure that gasoline prices remain within an affordable range.”
However, gasoline prices have declined in recent weeks, as oil prices have fallen from April highs. At the time, traders feared that Israel and OPEC member Iran were on the brink of war, which boosted crude oil futures prices.
According to the American Automobile Association (AAA), the average price of gasoline across the US on Tuesday was $3.59 per gallon, about 4 cents higher than the average price for the same period last year, but lower than last month. Despite the drop in gasoline prices over the past month, overall inflation remains stubborn, leaving consumers unhappy.
According to the Ministry of Energy, gasoline retailers and terminal markets will receive gasoline by June 30 at the latest. The Department of Energy said that the release will be distributed in the amount of 100,000 barrels at a time, 42 gallons per barrel to ensure that the bidding process is competitive, thereby maximizing the impact on the retail price of gasoline. The tender deadline is May 28, and the Treasury's General Fund will receive the proceeds from this sale.
The gasoline will be sold from storage sites in New Jersey and Maine, which are part of the Northeast US gasoline supply reserve, which was established after Superstorm Sandy destroyed refineries in 2012.
The release of gasoline reserves by the Biden administration is also aimed at effectively closing this storage center, which has been established for nearly a decade. Since storing refined fuel costs more than storing crude oil, the closure of the reserve center was included in the US funding bill signed by Democrat Joe Biden in March.
Gasoline sales come at a time when SPR is falling to its lowest level in decades. As energy prices soared due to the Russia-Ukraine conflict, the Biden administration released 180 million barrels of oil from the SPR in 2022.
Although the sale of reserves is authorized by bipartisan legislation, both the Biden administration and Republican presidential candidate Trump have reaped benefits from it.
Trump said Biden used reserves to depress retail gasoline prices for political reasons. “He (referring to Biden) is trying to stop high oil prices because this situation is not good for the election,” he said outside the New York court where he was being tried on sealing fees.