Why Biden Just Dumped the Northeast Gasoline Supply Reserve

Is President Biden’s move to dump  the Northeast Gasoline Reserve a wise move or a blunder for U.S. energy security?

This is the question that a lot of us are asking ourselves this week after news came out that the Biden administration is selling one million barrels of gasoline from the Northeast Gasoline Reserve. 

Granted, the answer typically depends on which side of the political aisle you fall. And let’s face it, we’re a society enamored with click-bait, and rarely do we find people that actually read beyond the headlines and figure out what’s really going on.

So today, I think it’s prudent we dig a little deeper than catchy tweets and the political mudslinging going on… because once you do, you’ll find out just how absurd things have gotten. 

We can’t exactly blame anyone for their excitement. After all, the most dreaded year in American politics is upon us, isn’t it?

First, it’s important to start at the beginning.

The Birth of the Northeast Gasoline Supply Reserve

The older members of our investment community will remember the catastrophic event that took place during the fall of 2012. 

On October 22, 2012, Sandy became the 18th named tropical cyclone of the Atlantic Hurricane season, and two days later grew into the second major hurricane that year. Although Hurricane Sandy was a Category 3 storm when it made landfall in Cuba, its diameter of 1,150 miles made it the largest Atlantic hurricane on record. 

In fact, Hurricane Sandy became the fifth costliest hurricane to hit the U.S., causing upwards of $70 billion in damage. 

Among the destruction was heavy damage to a couple of refineries, with water damage closing over 40 terminals in New York Harbor. As you might expect, it led to a severe fuel shortage, with some gas stations being completely dry for nearly a month. 

This is what prompted the Obama administration to create the Northeast Gasoline Supply Reserve. It was the first of its kind for gasoline, and was put in place as a security against future disruptions — 900,000 barrels of gasoline stored in New York Harbor and another 100,000 barrels placed in South Portland, Maine. 

Like the Strategic Petroleum Reserve, it was put in place to ensure energy security during an emergency. 

And then, with a flick of the Presidential pen… it was gone.

Based or Blunder: Biden Dumps the Northeast Gasoline Supply Reserve

Perhaps the most interesting part of this story is that nearly everyone gets it wrong. 

On the surface, selling off the entire Northeast Gasoline Supply Reserve looks like another Biden blunder when it comes to energy security. I’ll confess that was my first thought when I read what happened. 

“Oh boy, here we go again,” I whispered to myself as my mind instantly harkened back to 2022, when the President sold off an unprecedented amount of oil from our Strategic Petroleum Reserve. Not only did he drain the SPR to levels not seen in nearly 40 years, but a lot of that crude ended up outside of the United States. 

It was a calculated move to offer much needed relief in the short-term at the expense of long-term pain. It’s easy to argue that the decision to sell the SPR did a lot of damage to our energy security, but without it we would’ve faced an even sharper price spike during the summer of 2022. 

But when you dig just a little deeper into this story, things get interesting. 

To start, it wasn’t exactly President Biden’s decision to begin with. Back in March, Congress mandated the sale of the one million barrels and the closure of the Northeast Gasoline Supply Reserve. 

Why? Well, it’s a trivial amount of fuel if a severe supply shortage emerged on the East Coast. 

Essentially, it wasn’t really the President making some huge blunder on energy security; he was simply following through with what had already been decided. And to give a little credit to the Biden administration, the best time to execute those sales is between Memorial Day and the July 4th holiday, when gasoline demand ramps up and prices at the pump typically rise. 

According to AAA, the average price of gas in the U.S. right now is $3.61 a gallon. And even though gasoline inventories have been at the low-end of the 5-year average over the last few months, don’t be surprised to see a product build as refineries start ramping-up for summer. 

Remember, lower prices at the pump could give a boost to demand, which is around 2% lower than where it was a year ago. We won’t find out for a few more weeks if the U.S. consumer will head back out on the road. 

Only time will tell. 

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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