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US to close Northeast gasoline reserve with 1 million-barrel sale

Published 2024-05-21, 12:58 p/m
© Reuters. A person uses a petrol pump at a gas station as fuel prices surged in Manhattan, New York City, U.S., March 7, 2022. REUTERS/Andrew Kelly/File Photo
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By Timothy Gardner

WASHINGTON (Reuters) -President Joe Biden's administration will sell nearly 1 million barrels of gasoline in the U.S.-managed stockpile in northeastern states as required by law, the Department of Energy said on Tuesday, effectively closing the near decade-old reserve.

The department created the Northeast Gasoline Supply Reserve in 2014 after Superstorm Sandy left motorists scrambling for fuel. But storing refined fuel is costlier than storing crude oil, so closing the reserve was included in U.S funding legislation signed in March by Biden, a Democrat.

Bids are due on May 28 and the Treasury Department's general funds gets proceeds from the sale, the department said.

The volumes will be allocated in quantities of 100,000 barrels with each barrel containing 42 gallons, the department said. The gasoline should flow into local retailers ahead of the Fourth of July holiday, it said. 

While the sale was mandated by bipartisan legislation, both the Biden administration and Republican presidential candidate Donald Trump tried to score points from it.

Energy Secretary Jennifer Granholm said the Department of Energy had timed the sale to coincide with the runup to peak summer driving demand.

“By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the ... northeast at a time hardworking Americans need it the most,” Granholm said in a release.

U.S. gasoline prices have fallen for four weeks in a row to $3.58 a gallon amid plentiful supplies but remain about a nickel above year-ago levels, according to the Energy Information Administration. 

Trump said Biden was using the reserve to push down retail gasoline prices for political reasons.

"And so he's trying to stop that because high gasoline prices are not good for elections," Trump said outside the New York courtroom where his hush-money trial is taking place.

U.S. gasoline prices are about 30% cheaper now than in June 2022 when they hit a record above $5.00 a gallon. Prices have fallen as U.S. crude oil output has hit a record under Biden.

Trump said Biden was selling the gasoline, "because he's unable to drill properly."

The energy department will be selling into a well-supplied market, where pump prices fell for the fourth straight week on Monday despite the run up to the Memorial Day weekend that kicks off the summer driving season.

Higher refinery output and weak fuel demand this year have helped ease some of the supply constraints that U.S. consumers have faced since the pandemic.

Gasoline inventories along the U.S. East Coast stood at 55.5 million barrels, 6% higher year-on-year, but around 8% below the historical average for this time of the year.

The companies buying the gasoline, likely retailers and fuel terminals, will have the fuel transferred or delivered no later than June 30, it said. Some 900,000 barrels will be sold from the reserve's Port Reading, New Jersey, site, and nearly 99,000 barrels from the South Portland, Maine, site.

© Reuters. A person uses a petrol pump at a gas station as fuel prices surged in Manhattan, New York City, U.S., March 7, 2022. REUTERS/Andrew Kelly/File Photo

Once the reserve is closed, the energy secretary cannot establish any new regional petroleum product reserve unless funding is requested in advance of an annual budget submitted by the president and approved by Congress.

Bob McNally, president of consultancy Rapidan Energy, said unlike the Strategic Petroleum Reserve that holds hundreds of millions of barrels of crude oil, the gasoline reserve was "too tiny to provide much energy security and won't be missed."

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