The White House is considering an emergency declaration that would enable President Joe Biden to release diesel from rarely used stock in an effort to address major supply crisisA senior White House official told CNN.
Deliberations about eavesdropping on Northeast home heating oil reserve It highlights the level of concern within the White House over the record rise in diesel prices.
Diesel is a vital fuel for the American economy, providing not only power for agricultural and construction equipment, but also trucks, trains, and boats that move goods across the country. Extremely high diesel prices are likely to pass on to families, contributing to America’s worst inflation crisis in four decades.
Diesel stocks in the Northeast have fallen to record levels in recent weeks due to a confluence of factors including the war in Ukraine and rising demand.
“The system is definitely under pressure,” the senior White House official said.
The effect of such a launch would be limited by the relatively small size of the reserve, which contains only one million barrels of diesel – the equivalent of about a day’s supply in the region.
“It’s little fries. “You might buy two weeks or even months, but it doesn’t solve the underlying issues,” Andy Lipow, president of Lipow Oil Associates, told CNN.
The national average price for a diesel was $5.56 a gallon as of Sunday, just below the record $5.58 set last week, according to AAA. These tags 75% increase over last year A leading energy economist recently told CNN that the price could rise to $10 a gallon by the end of summer.
But the situation is worse in the Northeast, an area with fewer refineries. For example the average price of a gallon of diesel in New York is $6.52 per gallon, An increase of 102% over last yearAccording to AAA.
Alarmed by low inventories and rising prices, Biden officials began expanded internal briefings and consulted with fuel retailers to better understand the situation, the official said.
Now they are considering releasing diesel from home heating oil reserves in the Northeast, a move that has only been done once before: In the aftermath of Superstorm Sandy in 2012.
The reserve was originally launched in 2000 as a way to cope with a supply crunch caused by a severe winter storm. In 2011, it was converted from home heating oil to ultra-low sulfur distillates, a cleaner-burning diesel used to power engines in trucks, tractors and other vehicles.
Biden has asked officials to do the essential work needed to be ready to release fuel from the reserve, a senior White House official told CNN.
“We think this appears to be the exact circumstance in which release should be considered, and that’s what the president has instructed,” the official said.
However, the reserve is relatively small and may only buy time, a limited amount at that.
By comparison, America’s emergency oil reserve, the Strategic Petroleum Reserve, currently contains 420 million barrels of crude oil. And that’s despite a series of massive SPR releases made during the Biden administration that slashed rainy-day money.
“It’s a first aid kit — it won’t last very long and when it goes off it doesn’t heal,” Lipow said of the diesel reserve.
The diesel supply crisis was driven by a myriad of factors.
First, multiple refineries have been shut down in the United States and Canada in recent years, limiting the system’s ability to produce gasoline, diesel and jet fuel to meet demand.
Second, energy demand has rebounded from the Covid-19 crash as people fly and drive more. High prices for jet fuel spurred refineries to produce more of this fuel instead of diesel.
Then the war in Ukraine and the sanctions that followed further blurred the picture.
Some Russian refineries have been partially or completely closed as Western countries try to punish Moscow for invading Ukraine.
Analysts say the loss of Russian petroleum products has led to an increase in US diesel exports to Europe and elsewhere – just as diesel demand has increased within the United States.
The good news is that there are signs that the diesel supply crisis is abating, indicating that perhaps no release from the Northeast reserves will be needed.
For example, government statistics show stocks of distilled fuel By 1.2 million barrels last weekalthough it’s still 22% below the five-year average for this time of year.
Moreover, Tom Cluza, global head of energy analysis for the Oil Price Information Service, noted how the Colonial Pipeline, a major pipeline that brings fuel to the Northeast, is fully engaged after weeks of underutilization.
“My hunch is we’ve probably been through the worst of it,” Kloza said.