U.S. to Sell Gasoline From Strategic Stockpiles

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Mandated by Congress, and just a few months before national elections, the U.S. Department of Energy said it would tap strategic reserves of gasoline to ensure adequate summer supplies.

Congress called for a sale of government-owned gasoline stocks in a spending bill passed in March. The government will now sell off 1 million barrels of gasoline stored in the Northeast Gasoline Supply Reserve (NGSR), closing the facility in the process. It was established in the wake of Hurricane Sandy in 2012.

In announcing the sale, Energy Secretary Jennifer Granholm said the government is "laser focused" on keeping retail gasoline prices stable ahead of the summer driving season, which runs through the long Labor Day holiday weekend in September.

"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," she said.

The reserves are located in the New York Harbor and in South Portland, Maine.

Travel club AAA is expecting record-setting travel levels this upcoming Memorial Day weekend. Some 43.8 million people are expected to travel 50 miles or more over the weekend, a 4% increase from last year and close to the record of 44 million set in 2005.

Nearly 88% of those vacationers will be on the road, AAA estimates. The increase in travel volumes, meanwhile, comes as many people struggle with paying their bills because of lingering inflationary pressures, a concern for President Joe Biden ahead of November elections.

Though down from the year-on-year inflationary reading of 9.1% in June 2022, inflation at 3.4% to April is still above the 2% target rate set by the Fed. The food and energy components of the Consumer Price Index are typically significant contributors to inflation.

But gasoline prices are moderating, and more consumers are using electric vehicles to travel, suggesting the million-barrel release would have only a limited impact on retail prices.

AAA on Wednesday listed the national average retail price at $3.61 for a gallon of regular unleaded gasoline, compared with $3.54 per gallon this time last year. In New York state, the price at the pump averaged $3.69, compared with $3.65 at this point last year.

Consumer demand, meanwhile, appears somewhat sluggish. The Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, showed total motor gasoline supplied over the four-week period to May 5 averaged 8.7 million barrels per day (BBL/d). That serves as a proxy for consumer demand, and the figure is some 4.5% below year-ago levels.

And it's the price of crude oil more than anything else that impacts the price that consumers see at the pump, the EIA explained. Over the decade ending in 2022, EIA said the price of crude oil accounted for 54% of retail gasoline prices.

Crude oil prices, meanwhile, move on global factors more than national events. The price for Brent crude oil, the global benchmark, was up 8% from year-ago levels to trade near $82 per barrel on Wednesday, though that's well below the $91 level reached on April 5.

EIA expects the national average to hold at around $3.50 per gallon through next year.

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