Out of MasterRsource
By Allen Brooks — May 23, 2024
“The hypocrisy of the Biden administration, which is basing lower gasoline prices at the start of the summer driving season on fulfilling a congressional mandate, is not surprising.”
“We now have the incredible scenario that Democrats in Congress and Biden are prepared to empty gasoline reserves just days before the start of hurricane season.”
The Energy Department announced Tuesday that it will begin selling the one million barrels of gasoline from the Northeast Gasoline Supply Reserve. Bids for the supply must be submitted on May 28, with delivery to be made by June 30. Bids will be accepted for batches of 100,000 barrels. The supply represents 42 million gallons of gasoline and will be stored in commercial storage tanks in Maine and New Jersey.
The sale was mandated by the sweeping congressional appropriations bill (HR 2882), which passed in late March with procedural shenanigans from Senate Leader Chuck Schumer. As you'll recall, in the final hours of Friday before Congress' week-long Easter recess, the House of Representatives passed the bill, which provides funding to keep government running through the end of the fiscal year on Sept. 30, by a vote of 286 to 134. The bill was sent to the Senate, which passed it in the early hours of Saturday morning and sent it to the White House that evening for President Joe Biden's signature. Importantly, more Democrats than Republicans voted for the bill in the House, while more than 100 Republicans voted against it.
We now have the astonishing scenario that Democrats in Congress and Biden are poised to empty gasoline reserves just days before hurricane season begins. Energy Secretary Jennifer Granholm said in a statement, “By strategically releasing these reserves between Memorial Day and July 4, we are ensuring adequate supplies to the three states and the Northeast at a time when hardworking Americans need them most.” How funny that the Biden administration is boasting about helping consumers by implementing a measure mandated by Congress.
I recently wrote about our drive from Houston to Rhode Island. My article was about gas prices and how they were rising north, largely due to higher state taxes in the Northeast states. I commented on Biden's election problem with high gas prices and our expectation that he would repeat his 2022 push to tap the Strategic Oil Reserve to lower pump prices in the run-up to the November election. He was successful, but as one graph shows, gas prices at the pump have increased 53% since Biden took office.
Biden was successful in lowering gasoline prices by boosting the SPR in 2022.
The gasoline reserve was created in 2014, two years after Superstorm Sandy struck the Northeast and disrupted fuel supplies, driving up gasoline prices. Some stations went without fuel for 30 days. Maintaining gasoline supplies in the region reduces the risk to consumers during future storm disruptions.
The East Coast states rely on the Colonial Pipeline for 55% of their gasoline, diesel and jet fuel supplies.
The vulnerability of Northeast and Mid-Atlantic states to fuel supply disruptions was demonstrated on May 7, 2021, when the Colonial Pipeline fell victim to a ransomware attack. The pipeline, which begins in Houston and runs to New York, supplies East Coast states with 55% of their petroleum fuels – gasoline, diesel, and jet fuel. The pipeline was shut down to protect its operations and billing system. After the ransom was paid, operations slowly resumed.
Due to panic buying, fuel shortages occurred at gas stations as the pipeline was shut down for several days. By the fourth day, Alabama, Florida, Georgia, North Carolina and South Carolina were reporting shortages. Areas from northern South Carolina to southern Virginia were the hardest hit. On May 11, 71% of gas stations in Charlotte were out of fuel, and on May 14, 87% of gas stations in Washington, DC were out of fuel. Average fuel prices rose to their highest levels since 2014, reaching more than $3 per gallon. The availability of jet fuel prompted several airlines operating out of Charlotte to change their fueling policies, including forced fuel stops for long-haul flights.
It is estimated that the sale of the gasoline reserves will generate $125 million, but will mainly reduce storage costs. The Department of Energy's 2022 report on the SPR states that operating and maintaining the gasoline reserves costs about $13 per barrel annually, compared to about 30 cents per barrel for crude oil in the SPR.
The hypocrisy of the Biden administration in attributing lower gasoline prices at the start of the summer driving season to fulfilling a congressional mandate is not surprising. It is also astonishing how shortsighted Democrats are, particularly those in the Northeast states that voted for the appropriations bill. Their shortsightedness is laughable considering how much the region's energy supply is at risk from supply disruptions on the eve of the start of hurricane season, which is expected to be extremely severe.
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For more contributions by G. Allen Brooks, see Energy Musings: Insights into the Energy Industry, where this post first appeared. It has been lightly edited for publication here. Mr. Brooks is a long-time participant, observer and commentator on the energy industry. He has served as a Wall Street securities analyst, manager of an oil services company, advisor to energy company executives, member of the board of directors of numerous energy companies, and author and commentator on energy markets and trends.
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