The Biden administration is considering a release of diesel fuel from federal reserves to address skyrocketing prices and the threat of supply outages on the East Coast, The Wall Street Journal reports.
Officials have drafted an emergency declaration as prices have soared to record highs in recent weeks, White House spokeswoman Emilie Simons said on Twitter on Monday. Such a declaration would allow for the quick release of some of the 1 million barrels of diesel in the Northeast Home Heating Oil Reserve “if necessary,” she said.
“We’re closely monitoring challenges to diesel supply and prices as a result of Putin’s invasion,” she said, referring to the Russian war in Ukraine that has roiled global energy markets. “This would bridge short-term supply shortfalls.”
Diesel prices have been rising around the world as economies have rebounded from the Covid-19 pandemic, several refineries have closed and Western countries have attempted to curtail imports of Russian energy. Crude and gasoline prices have been on the rise, too, but diesel has outpaced them because of the refinery closings and because Russia was such a big supplier of refined fuels into Europe, causing ripple effects world-wide.
Supplies are particularly tight along the U.S. East Coast where inventories have dropped to their lowest level since at least 1990. U.S. average retail prices for ultra-low-sulfur diesel rose more than 37% in just 10 weeks after Russia’s invasion of Ukraine, setting a new nominal record of $5.62 a gallon in the week ended May 9, according to the U.S. Energy Information Administration.
The Biden administration has been preparing for a release in case those soaring prices and shrinking inventories lead to local supply outages, according to a White House official. But diesel inventories in the Northeast have started to rise again and retail prices fell last week for the first time in a month, leaving administration officials optimistic for now that they might not need to intervene, the official said.
The administration has separately tapped the U.S. Strategic Petroleum Reserve several times since late last year as part of a coordinated effort with other countries to lower crude and gasoline prices. The results have been mixed, with oil prices retreating slightly from historic highs but gasoline prices still setting new records.
Boosting the supply of diesel on the market should lower prices for motorists and truckers, but there is no guarantee. Futures and wholesale markets are complex and prices move for many reasons.
The Northeast Home Heating Oil Reserve was created during the Clinton administration. It was designed primarily to help states that still disproportionately use distillates, including diesel, for home heating, according to the Energy Department.
It now holds 1 million barrels of ultra-low-sulfur diesel at storage sites around Boston, New York Harbor and southeastern Connecticut. It has been tapped only once, to address shortages in the aftermath of superstorm Sandy in 2012.
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