White House Weighs Tapping Into Emergency Diesel Reserve

Soaring prices for diesel are likely being passed on to American families.

May 24, 2022

Filing a Diesel Tank

NEW YORK—The White House may tap into a rarely used diesel stockpile to lower the prices and address a major supply crunch, reports CNN. The emergency declaration would allow President Joe Biden to tap into the Northeast Home Heating Oil Reserve, as diesel inventories in the Northeast are at record lows in recent weeks due to multiple factors, including the Ukraine war and increased demand.

The national average price for a gallon of diesel is $5.55, according to AAA, up from $5.08 a month ago and $3.18 a year ago. The high prices are likely getting passed on to American households and contributing to America's worst inflation crisis in four decades, says CNN.

The amount that the president would release from the reserve is one million barrels, which is a small size of the reserve and equal to about a day’s worth of supply in the Northeast, according to CNN.

The diesel supply crunch is worse in the Northeast, as some refineries have closed down since 2000, reports Reuters. The reserve was created in 2000 as a way to meet a supply crunch caused by a severe winter storm, and it has only been tapped into once, which was during Superstorm Sandy in 2012.

In 2011, the reserve was converted from home heating oil to ultra-low sulfur distillate, a cleaner-burning diesel used to power engines in trucks, tractors and other vehicles.

"It's small potatoes. It might buy a couple of weeks or even months, but it doesn't solve the underlying issues," Andy Lipow, president of Lipow Oil Associates, told CNN.

The diesel supply issue has been driven by multiple U.S. and Canadian refineries retiring in recent years, limiting the system's capacity to supply gasoline, diesel and jet fuel to meet demand. Additionally, the demand for fuel has made a comeback as COVID-19 fears wane, and soaring jet fuel prices have incentivized refineries to make more of that fuel instead of diesel. Plus, the energy sanctions on Russia in response to its invasion of Ukraine has further complicated the supply chain, as some Russian refineries have partially or fully shut down.

But the U.S. may not even need the reserve after all, as government data show that distillate fuel inventories increased by 1.2 million barrels last week, although they are still 22% below the five-year average for this time of year. Also, Colonial Pipeline is fully online after weeks of being underused.

"My hunch is we're probably through the worst of this," Tom Kloza, global head of energy analysis at the Oil Price Information Service, told CNN.

The NACS blog post “Is Gas Tax Relief a Good Idea?” discusses how easing consumer pain at the pump is a good idea, unless it causes more problems.

The Convenience Matters podcast episode “What’s the Tipping Point for Gas Prices?” explores how much pain at the pump that consumers will tolerate and what’s ahead for the summer driving season.

Here’s what consumers should know when gas prices soar.