America is considering a rare decision to withdraw from the diesel reserves... What does this mean?  - energy

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  • Diesel prices in America have reached high levels
  • The Northeast region is hardest hit by the lack of supplies
  • The US administration is considering withdrawing from diesel reserves
  • Distillate stocks in the Northeast at a record low

The White House is considering a rare decision to withdraw from America’s diesel reserves, in order to face the sharp rise in prices, amid a shortage of supplies.

The national average diesel price in America was $5.56 a gallon on Sunday (May 22), up 75% from a year ago, but just below the $5.58 record set last week, according to data from the American Automobile Association (AAA).

The US Energy Information Administration estimates that the average price of diesel fuel for individuals in the US was $5.61 per gallon on May 16, up $2 from levels on January 3.

With the price jump, Reuters quoted an official in the US administration on Monday, that the White House is considering an emergency declaration to withdraw from America’s diesel reserves; Desire to address the supply crisis.

diesel reserve

Northeast diesel prices were among the highest in the country, with New England and Mid-Atlantic average retail prices of $6.43 and $6.36 a gallon on May 16, up 78% and 68%, respectively. Since the beginning of the year, according to the US Energy Information Administration.

According to Reuters, the effect of withdrawing from diesel reserves will be limited; Due to the relatively small size of the reserve, which only contains about one million barrels of diesel, the equivalent of one day’s consumption in the region.

The White House’s withdrawal of heating oil reserves, located in the northeastern United States, would mark the second time it took such a step since 2012, in the wake of Hurricane Sandy.

The diesel reserve – established by the United States in 2000 – aims to provide protection for homes and businesses in the northeastern United States, in the event of a supply interruption.

Diesel reserves are concentrated in 3 locations in the Northeast region:

  • 400,000 barrels in the Boston area.
  • 300,000 barrels inside the New York port area.
  • 300,000 barrels in Groton, Connecticut.

US strategic oil reserves

Distillate stocks

Because the East Coast consumes more oil products than regional refineries produce, the region receives supplies from the US Gulf Coast, and imports from other countries.

In addition, East Coast distillate refining capacity fell by about 100,000 barrels per day with the closure of the Philadelphia Energy Solutions refinery, following the June 2019 explosion.

With supplies short – due to reduced refining capacity in the US Gulf Coast region as well – withdrawals from commercial distillate stocks in the Northeast US have increased in recent weeks as prices have risen.

Distillate stocks in the region reached the level of 22.5 million barrels in the week ending May 13, to be 47% less than the 5-year average, after hitting a record low in the previous week, which makes the US administration think about diesel reserves. .

In general, stocks of distillates in the United States stand at their lowest levels since 2005, after reaching 105.3 million barrels in the week ending May 13th.

The withdrawal of oil reserves continues

Away from plans to release diesel reserves, the administration of US President Joe Biden has resorted to withdrawing from the strategic oil reserve 3 times in recent months, to confront the rise in gasoline prices, which reached a record level at $ 4.50 a gallon, but it has not shown any signs of calm so far. .

In early March, the United States announced the withdrawal of 30 million barrels from the strategic stockpile, after it committed to releasing 50 million barrels in November 2021.

With the small impact of these withdrawals, the US administration announced – at the end of last March – the largest withdrawal of the strategic oil reserves ever, by selling 180 million barrels for a period of 6 months, to face the repercussions of the Russian invasion of Ukraine.

The completion of these withdrawals would push the strategic reserve to its lowest level since 1984, at 385 million barrels.

America's Strategic Oil Reserve 5-17-2022

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