By Guy Page

The federal government will liquidate the entire one-million barrel inventory of the Northeast Gasoline Supply Reserve (NGSR) in order to suppress gasoline prices this summer, and especially for the July 4 weekend, according to a federal press release.

The sale of every drop of gasoline in the nation’s first gasoline supply reserve will have two effects:

1. It will reduce the cost of gasoline this summer, particularly around the long, high-travel-volume Independence Day weekend. 

2. It will leave the northeast open to a repeat of the 2014 Superstorm Sandy scenario in which some gas stations were without gas to sell for up to a month. 

According to a May 21 U.S. Department of Energy press release titled “U.S. Department of Energy Announces Sale of Northeast Gasoline Supply Reserve as Americans Hit the Road for Summer Driving Season,” the government’s decision to sell the entire northeastern reserve supply “is strategically timed and structured to maximize its impact on gasoline prices, helping to lower prices at the pump as Americans hit the road this summer.”

The sale was authorized in the March budget agreement in Congress. It also explicitly prevents the DOE from creating another gasoline supply reserve program unless specifically included in its annual budget process. 

The gasoline is now stored at Port Reading, NJ (900,000 bbl) and South Portland, ME (98,824 bbl). Each barrel contains 42 gallons of gasoline. 

The volumes will be allocated in quantities of 100,000 barrels, DOE said. “This approach will ensure a competitive bidding process that both fuel retailers and terminal holders can participate in – ensuring this product can flow into local retailers ahead of the Fourth of July 4 holiday and that it will be sold at competitive prices, helping lower costs for American families and consumers.”

In 2012, Superstorm Sandy made landfall in the northeastern United States and caused heavy damage to two refineries and left more than 40 terminals in New York Harbor closed due to water damage and loss of power, according to the NGSR website, This left some New York gas stations without fuel for as long as 30 days. As part of the Obama Administration’s ongoing response to the storm, the Department of Energy established the Northeast Gasoline Supply Reserve (NGSR); the first federal, regional, refined petroleum product reserve containing gasoline

Creation of the emergency stock of gasoline was authorized by Energy Secretary Ernest Moniz on June 20, 2014, the NGSR website states. Secretary Moniz directed the Office of Petroleum Reserves to establish a one million barrel gasoline component of the Strategic Petroleum Reserve in the Northeast. 

The intent was to create a buffer large enough to allow commercial companies to compensate for the initial impacts of interruptions in supply, but not so large as to dissuade the companies from maintaining stock levels sufficient to respond to routine disruptions or to recognize that increasing prices are an indicator that more supply is needed. A one million barrel emergency reserve would give Northeast consumers supplemental supplies for a few days in the event of a hurricane or other disruption, until existing distribution infrastructure could return to full operation.

As the Vermont energy market moves to electrification, Vermonters look to a network of short-term buffers of alternative energy sources in the absence of electrical power (blackouts, brownouts). As a result of the decision by Congress in March and the DOE moving to sell the NGSR, that network is now smaller by one.