Seven Months of Fuel Relief, and the Records Kept Coming

The Strategic Petroleum Reserve now holds roughly 243 million barrels of crude, down from about 415 million in May and the lowest since 1983 ^[1]. Analysts who track it put its operational floor — the level below which it can no longer absorb the next shock — at 250 to 300 million barrels, and the rapid drawdowns have damaged the salt caverns that store the crude, with Congress refusing to fund buying any back ^[2][3]. Gasoline stockpiles sit at 204 million barrels, the lowest since November 2014 ^[4]. Households carried $25 billion in unpaid utility bills before the war ever began ^[5]. Part of that stack is a receipt for seven months of uninterrupted relief. The reserve's slide from 415 million to 243 million barrels is, barrel for barrel, what the relief was paid with ^[1]. The stockpile and the utility debt are not on the receipt — the stockpile fell in a refining crisis, the debt predates the war — but they are what remains of the cushion the relief was supposed to protect ^[4][5]. In March the White House released 172 million barrels from the reserve, and AAA reported it produced no immediate relief at the pump ^[6]. In April a ceasefire pushed the national average back below $4 a gallon, and every analyst credited the dip to the peace news rather than the barrels. Then Iran re-closed the Strait of Hormuz on April 20 ^[7].

As a result, gasoline prices are likely to rise again in the days ahead, with diesel expected to follow if disruptions persist, and many of the states that exhibit price cycling could see increases in the next 24-48 hours. — Patrick De Haan

The federal gas-tax holiday proposed in May — 18.4 cents on a gallon — stalled in the Senate against the warning that it would drain the Highway Trust Fund ^[8]. That month's price drop earned a name from one analyst.

You have the largest drawdown in history of inventories and prices fall dramatically. This is a head fake and it is highly deceptive because it’s masking what needs to be done to replace the supply shortage. — Dan McTeague

The states paid their own relief out of named funds. Indiana's holiday cost a $130.45 million backfill from its Highway Fund for June alone, transportation money spent at the pump ^[9]. North Carolina's Relief at the Pump Act draws roughly $360 million from a reserve named for exactly what the money has failed to buy: the Stabilization and Inflation Reserve ^[10]. The campaign ran on a timetable that was on the record. In April, 77 percent of registered voters blamed the president personally for the gas surge; by June, 66 percent said fuel prices would shape their November vote ^[11][12]. The White House had promised since June that prices would fall quickly once the war resolved ^[12]. By October the relief was deploying even as the administration argued it was no longer needed. The order cutting the federal tax on dyed diesel — the fuel that runs farms and construction sites — landed the same day the G7 pledged 100 million more barrels, and the same day the secretary of state said oil flows were nearly back to pre-war levels ^[13]. Midway through that run, on September 29, gasoline set its record at $4.43 a gallon and diesel at $6.32, diesel up 68 percent since the war began ^[4][14]. The bill was not canceled, only moved. Diesel's 68 percent rise runs on the same fuel that heats homes in the Northeast: the Energy Information Administration now forecasts heating-oil bills up 21 percent this winter, in a season pre-war projections had already priced 11 percent higher for home heating overall ^[14][5]. The Federal Reserve hiked unanimously in September, markets price another in December at better than 84 percent, and the 10-year Treasury yield sits at 5.35 percent, a 24-year high ^[13][15][16]. The analyst who named May a head fake put the whole ledger in one line.

We all want lower prices, but it comes at a significant cost. You can pay me now or you can pay me later. — Dan McTeague

The relief runs on the election's clock; the bill runs on winter's. Georgia's holiday ends November 5, North Carolina's November 30 ^[10]. The heating season arrives after, and the shutoff protections covering households already $25 billion behind run out in March ^[2][5]. There are reasons to think the drain is a short bridge rather than a wound — oil is flowing again, Kuwait ramping back, and one market analysis argues prices will collapse by mid-January, which even in its most bullish form puts the break after the election ^[17][18]. But the government's own forecaster still holds Brent near $105 through the fourth quarter as global stockpiles keep falling ^[19]. And some state officials warned the holidays may not reach the pump at all.

Any talk of suspending state gas tax is an ill-advised plan. — Arkansas Department of Transportation

The World Bank published a results sheet for this exact strategy on October 7, the same week the G7 pledged its next 100 million barrels ^[20]. It audited Asian economies that ran the identical play — subsidies and reserve drawdowns to hold the price down at the pump — and found they burned through 15 to 40 percent of their foreign-exchange reserves doing it ^[20]. The report states what all that spending bought.

Countries with substantial subsidies in place generally have had smaller increases in retail gasoline prices than non-subsidizers, but this relationship weakened considerably for headline inflation. — World Bank Group