Gas Prices Fall For 7 Days As White House Considers Selling Emergency Reserves To Avoid Dreaded Return To $4 Mark

Topline

The Biden Administration is planning to tap into the country’s emergency petroleum reserves in an attempt to cut gas costs ahead of the midterm elections next month, sources told Reuters, even as national gas prices drop for seven straight days as demand drops and several key refineries come back online.

Key Facts

The Biden Administration’s expected announcement would open 14 million barrels of petroleum for sale—the second sale from the Strategic Petroleum Reserve this year, following the sale of 180 million barrels in March, which lasts from May to October.

It comes as the national average price for a gallon of gas dips from $3.92 to $3.87 per gallon over the past week—more than a dollar short of its all-time record high of $5.02 on June 14, according to AAA—although it’s up 20.6 cents from a month ago and 56.6 cents higher than a year ago, according to GasBuddy.

A gallon of gas costs more than $5 in five states, including California ($6.03), Alaska ($5.40), Oregon ($5.30), Hawaii ($5.23) and Washington ($5.22).

National gas demand is also cooling, from 9.47 million barrels per day last week to 8.28 million barrels per day on Monday, according to data from the Energy Information Administration, meaning gas prices could continue to drop, AAA analysts suggest.

Meanwhile, Georgia boasts the lowest prices in the country, at $3.25 per gallon, followed by Texas ($3.29), Mississippi ($3.32), as well as Arkansas, South Carolina and Tennessee ($3.37).

What We Don’t Know

Sources told Reuters the Department of Energy is also planning to buy oil back from U.S. producers to replenish the country’s emergency reserves. Those reserves fell by 7.7 million barrels in the week ending October 7, and another 3.3 million barrels last week, according to HFI Research. The DOE had said in May it would open a bidding process to buy back a third of the 180 million barrel sale.

Contra

While gas prices rise in several states, primarily on the East Coast, motorists in California and Great Lakes states have seen a sharp decline in gas prices as key state refineries that convert oil to gas come back online after being temporarily shut down. Prices in California have tumbled nearly 50 cents over the past 14 days, down from $6.42 to $6.03, according to AAA after five refineries came back online, allowing California to resume production of a type of fuel blend required under state law. They set an all-time record in Los Angeles County on October 6, at $6.49 per gallon. In a statement this week, GasBuddy’s head of petroleum analysis Patrick De Haan said he expects a sharper drop on the West Coast and Great Lakes states.

Key Background

Rising inflation accelerated by increased gas prices has been a central point in congressional races ahead of the November 8 midterm elections. Gas prices soared between March and June as crude oil prices spiked after Russia invaded Ukraine, and although those prices have since fallen more than a dollar from their peak in June, the idea of prices returning to $4 a gallon is something the Biden Administration desperately wants to avoid, one source told Reuters. In recent months, Biden has made several attempts to curb gas and energy prices further, including a plea to gas station owners to cut prices. He also considered imposing a ban on U.S. natural gas exports, which his administration later ruled out. Analysts blame the rise in gas prices over the past month on tight supplies following the shutdown of oil refineries in California and Great Lakes states, as well as the decision last month by OPEC+ oil-producing countries to slash production by 2 million barrels per day.

Further Reading

Los Angeles Gas Prices Break Record—Here’s Why They’re So High, And Why They Could Fall Soon (Forbes)

Gas Prices Rising Again—These States Are Where Cost Is Spiking Fastest (Forbes)

Gas Prices Near $4 Again, Continuing 2-Week Climb (Forbes)