Biden Games Gasoline Prices (election ahead?)

From MasterResource

By Allen Brooks — May 23, 2024

“The hypocrisy of the Biden administration taking credit for lower gasoline prices as the summer driving season begins by fulfilling a Congressional mandate is unsurprising.”

“We now have the amazing scenario where days before the start of the hurricane season, Democrats in Congress and Biden are willing to empty the gasoline reserve.”

The Department of Energy announced Tuesday that it would begin selling the one million barrels of gasoline in the Northeast Gasoline Supply Reserve.  Bids for the supply are due May 28th with delivery expected by June 30th.  Bids will be accepted for lots of 100,000 barrels.  The supply represents 42 million gallons of gasoline and is held in commercial storage tanks in Maine and New Jersey. 

The sale was mandated by the omnibus Congressional spending bill (HR 2882) approved in late March with procedural hijinks by Senate Leader Chuck Schumer.  If you remember, it was during the final hours of the Friday before the week-long Congress’ Easter Recess that the House passed the legislation 286-134 providing funding to keep the government operating through its September 30 fiscal year-end.  The bill was passed over to the Senate which passed it in the early morning hours of Saturday and forwarded it to the White House for President Joe Biden’s signature that evening.  Importantly, more Democrats than Republicans in the House voted for the bill as more than 100 Republicans voted against it. 

We now have the amazing scenario where days before the start of the hurricane season, Democrats in Congress and Biden are willing to empty the gasoline reserve.  Energy Secretary Jennifer Granholm said in a statement, “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.”  How funny that the Biden administration is taking credit for helping consumers by following through on a Congressionally mandated action. 

I recently wrote about our drive from Houston to Rhode Island. My article discussed gasoline prices and how they became more expensive as we headed north, primarily due to higher state taxes in the Northeast states.  I commented on Biden’s election problem with high gasoline prices and our expectation that he would repeat his 2022 move to tap the Strategic Petroleum Reserve to lower pump prices in the run-up to the November election.  He was successful, but as shown in a chart, gasoline pump prices have increased 53% since Biden entered office.

Biden successfully pushed down gasoline prices by tapping the SPR in 2022.

The gasoline reserve was established in 2014, two years after Super Storm Sandy slammed the Northeast region and disrupted fuel supply availability sending gasoline prices soaring.  Some gasoline stations were without fuel for 30 days.  Having gasoline supplies pre-positioned in the region reduces the risk for consumers from future storm disruptions. 

East Coast states depend on Colonial Pipeline for 55% of their gasoline, diesel, and jet fuel supply.

The vulnerability of the Northeast and Middle Atlantic states to fuel supply disruptions emerged on May 7, 2021, when the Colonial Pipeline was hit in a ransomware attack.  The pipeline, which originates in Houston and runs to New York, supplies the East Coast states with 55% of its petroleum fuels – gasoline, diesel, and jet fuel.  The pipeline was shut down to protect its operations and billing system.  Operations were slowly restarted after the ransom was paid. 

Fuel shortages occurred at gasoline stations amid panic buying as the pipeline shutdown extended for days.  By the fourth day, Alabama, Florida, Georgia, North Carolina, and South Carolina reported shortages.  Areas from northern South Carolina to southern Virginia were hardest hit, with 71% of gasoline stations running out of fuel in Charlotte on May 11th and 87% of stations out in Washington, D.C., on May 14th.  Average fuel prices rose to their highest point since 2014, reaching more than $3 a gallon.  Jet fuel availability caused several airlines operating from Charlotte to alter refueling arrangements including forced refueling stops for long-haul flights. 

Estimates are that the gasoline reserve sale will raise $125 million but, importantly, cut storage costs.  The Energy Department’s 2022 report on the SPR said it costs about $13 per barrel annually for operations and maintenance of the gasoline reserve compared with about 30 cents per barrel for crude oil in the SPR. 

The hypocrisy of the Biden administration taking credit for lower gasoline prices as the summer driving season begins by fulfilling a Congressional mandate is unsurprising.  We are also struck by how shortsighted Democrats are, especially those in the Northeast states who voted for the spending bill.  Their shortsightedness is laughable given the region’s energy risk from supply disruptions on the eve of the start of the hurricane season, which is predicted to be extremely active. 

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For more of G. Allen Brooks, see Energy Musings: Insights into the Energy Industry, where this post first appeared. It has been slightly revised for publication here. Mr. Brooks is a long-time participant in, observer of, and commentator on the energy industry. He has been a Wall Street securities analyst, an oil service company manager, a consultant to energy company executives, a member of the boards of directors of numerous energy companies, and a writer and commentator on energy markets and trends.