With crude oil prices getting close to all-time lows (when adjusted for inflation), now is the time for the Obama Administration to put the strong dollar to work and refill the SPR, and to consider adding a new site to increase the total storage capacity to the original target of 1 billion barrels.
Wild swings in commodities prices are not good for the economy overall. While the drop in the cost of oil and gasoline translates to more cash in consumer's pockets, which can translate to increased consumer spending and economic activity, crude prices that are two low can have negative impacts.
One negative impact is in that it takes the wind out of the sails of efforts to conserve. For example, at $2.20 per gallon for regular unleaded it takes over eight years for the owner of a typical hybrid automobile to recoup the added cost of the vehicle. Since that is longer than most people hold onto a car, there is essentially no financial incentive to buy the most energy-efficient vehicles.
And, since low oil prices feed through to energy prices overall, including the price of electricity, we can expect planned investments in wind and solar generation to be subject to re-evaluation.
Finally, it is the best interest of the United States to maintain the largest stockpile of crude oil possible to shield us from future supply shocks.
Therefore, Obama should authorize new additions to the SPR to help underpin crude prices and to provide us with an increased reserve against for the future.
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