Editorial: Fill 'er Up
Amid all the news last week about falling prices for crude oil and motor fuels, President Bush scored a direct hit by announcing he will fill the U.S. Strategic Petroleum Reserve to its limits. Much of that plan may not take effect for months, or even years, but the timing of Bush’s announcement couldn’t have been better. Bush unveiled the plan the same week that the global oil cartel, the Organization of the Petroleum Exporting Countries, failed to implement a 1.5-million-barrel cut in daily oil output. OPEC said it wouldn’t act to stabilize falling world oil prices until the non-cartel member nations also agreed to cut their own output by 500,000 barrels. As news spread of the delayed production cut, the price of oil fell even further.
So the United States has decided to boost its oil stockpile at a time when prices are on the decline.
Building up the reserve also gives the nation a stronger arsenal to deal with supply disruptions that could come if the U.S. war against global terrorism leads it to conflict with other nations beyond Afghanistan.
Since the United States is in a recession, and global demand for oil is likely to remain weak for some time, the country has a good chance to top out the SPR at bargain prices.
But it is useful to remember how quickly oil markets can shift. Just 14 months ago, with the strong urging of a trucking industry hit hard by surging fuel costs, President Bill Clinton drew down supplies from the SPR in a successful bid to ease a supply crunch that was driving up world prices.
While the current low prices keep more money in the hands of truck drivers and trucking companies, they also are a symbol of the collapse in demand for freight services.
Rebuilding the reserve is a prudent step, and doing it now is a smart move. Now we need economic policies that stoke up the economy and let us take advantage of these low fuel prices as we deliver more products.
This story appeared in the Nov. 19 print edition of Transport Topics. Subscribe today.
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