The release of 1 million barrels of gasoline may not make a dent in the energy prices – By Hemantha Yapa Abeywardena
With just six months to go before the presidential election in the fall, the Biden administration of the US appears to be taking the task of taming the inflation much more seriously than it did in the past few months.
In this context, the announcement made by the DoE, Department of Energy, on May 21, Tuesday, does not come as a surprise: it announced that 1 million barrels of gasoline from the NGSR, Northeast Gasoline Supply Reserve, will be sold off in time for the peak travel period between the Memorial Day and July 4; gasoline will be sold in batches of 100, 000 barrels, each.
“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,” said the US Energy Secretary Jennifer Granholm in a statement.
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The announcement by the DoE, coincided with the latest US crude inventory data from the API, American Petroleum Institute; there was a significant crude build during the week ending May 10 – 2.48 million barrels.
The combined impact of the twin developments, as expected, hardly had a catalytic influence on the prices of crude oil in the markets; as of 12:15 GMT on Wednesday, the price of WTI and Brent were at $78.24 and $82.45 respectively.
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The NGSR, Northeast Gasoline Supply Reserve, was setup in 2014, when President Obama was in office, in the aftermath of Hurricane Sandy in the same year.
Since the northeast region of the US suffered serious supply issues of gasoline during the hurricane and the weeks that followed, the Obama administration came up with the project in order to ease the burden on the consumers in a future weather-related event.
The NGSR, however, pales into insignificance, compared with the SPR, Strategic Petroleum Reserve of the US. It currently holds an estimated 340 million barrels, having released a bulk of it to stabilize the global oil prizes during the last two years.
The announcement already drew the ire of President Trump, as he came out of Manhattan courtroom from his trial on Tuesday: “It is a political ploy to shore up votes ahead of November election, ” said President Trump. He has already gone on record saying that he would tap into ‘Black Gold’ right under his feet with his ‘Drill Baby Drill’ strategy.
Commodity analysts, meanwhile, believe that the impact of 1 million additional barrels of gasoline in the markets on the gasoline prices will be insignificant; in the US, on average, the citizens used over 8.94 million barrels of gasoline in 2023. Therefore, 100,000 barrels in 10 batches could not make a dent in the current oil prices, analysts believe.
The members of the OPEC+, meanwhile, are scheduled to meet on June 1, unless something that could not iron out amicably pops up before the meeting. The widely reported issue involving Kazakhstan, an oil producer from Central Asia, over its quota still has the potential to postpone the meeting.
The prices of oil and gas have been defying the developments in the Middle East and Ukraine for months. The combination of factors such as the US crude stocks and OPEC+ production cuts is similarly losing the influence over the prices, leaving them entirely at the mercy of speculators – at present.
