Oil: Buy Low, Sell High

Congress would be wise to authorize purchasing a modest amount of domestic oil to top up the strategic reserve created after the 1970s Mideast oil embargoes.

To do so would be to follow the time-honored wisdom of Joseph in Egypt. Store grain in fat years; use it in lean years. These are fat years for Washington after three decades of federal deficits.

To do so would also honor marketplace wisdom: Buy low, sell high. The government has sold 28 million barrels in recent years at prices much higher than today's roughly $10 per barrel. Buying in that $10 range would certainly qualify as buying low.

And, finally, a modest purchase would support the reserve's "strategic" name. It would replenish not only oil sold at good prices to help shrink the federal deficit but 17 million barrels drawn out of the reserve during the Gulf War to prevent supply bottlenecks or price gyrations.

Objectors argue that spending is spending - even at bargain prices. It threatens federal budget restraints.

One answer examined by a Department of Energy task force calls for firms whose bids win offshore drilling leases to make part of their royalty payments in oil sent directly to strategic reserve storage.

Federal purchases for the strategic reserve wouldn't be big in the context of total global oil production. The overall price impact would be small.

The reserve (mainly held in natural underground salt cavities) can store some 680 million barrels. The nation's fuel gauge shows about 120 million barrels less in storage. That's roughly two week's worth of imported oil, an extra margin of safety in a crisis. Or it's a cushion that could be sold off once more when prices rise.

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