With summer demand approaching and prices still elevated, politicians are scrambling to find new levers to pull to alleviate fuel costs. Over the past week, two considerations have come to light that may offer some small relief. According to a CNN report, President Biden is considering a release from the Northeast Home Heating Oil Reserve, which holds around 42 million gallons of diesel fuel (or one day of regional supply). Like other reserve releases, the move will not fundamentally improve the market, but it may help resolve some spot outages in the Northeast. Created in 2000 to offset severe winter storms, the Northeast Reserve has only been tapped once before: in 2012 after Superstorm Sandy.
For gasoline, the administration is considering waiving an environmental rules that prevent summer smog, allowing high-RVP fuel to be used through the summer. Already, the White House has waived the rule for E15 blends, to allow cheaper ethanol to be used all year round. This latest waiver will apply to all gasoline blends. RVP requirements have been waived often in the past for regions with especially stringent requirements in response to hurricanes and other supply or demand disruptions, with the latest broad waiver coming in May 2020 when COVID-19 caused winter-blend gasoline to stack up in inventories. Winter-blend gasoline is a bit cheaper to refine, so this action could have a 3-10 cent impact on fuel prices.
Also making headlines today is the European Union moving ever closer to a final deal to sign the ban of Russian crude oil important. The German economy minister has now said that this embargo agreement could be reached “within days,” citing that the ongoing war in Ukraine has reached a point where the world must do something. Something to keep in mind is that the embargo, once signed, will not automatically destroy the Kremlin’s power. It will take time for an economy as strong as Russia’s to start feeling the long-term effects of such an embargo, but once it settles in the Russian government will be dealing with massive problems to their economy.
So, with the Russian oil ban likely to make the market even tighter, and US gasoline demand in the summer driving season giving support to the market, consumers are in for a rollercoaster ride of prices in the coming months. Overall, the outlook is clear – the market will remain tight and prices will remain elevated for the foreseeable future.