One of the biggest expenses for any heavy industrial business is fuel. Thus it makes sense to stock up when the price is lower, while storing it in oil tanks, and interestingly, one way out of the Ukraine crisis may reduce the price of oil.
The West’s response to Russia needs to be above inaction, which will only make Putin likely to invade other countries, and below nuclear brinkmanship, which involves too high a risk for a minor diplomatic dispute. One middle way to put pressure on Putin would be to release oil from America’s vast reserves. Experts note that this stockpile of oil could flood the markets for years, which would reduce the price of a barrel of crude by as much as ten dollars.
The last time that happened was in the eighties, when Middle Eastern wells stepped up production for their own economic reasons. As Russia’s economy was heavily dependent on the price of oil, the reduction in the commodity’s value resulted in massive losses of income, and the state collapsed. If America used this tactic today, we would experience a reduction in the price of fuel, which would go against the long term trend of higher fuel prices. Businesses that stocked up with oil tanks would experience a significant cost saving.
In addition as we move closer to the moment of ‘peak oil’, the underlying trend is for the commodity to become much more expensive with each passing year. While electric tractors, construction engines and lorries seem some way off, it makes sense to buy oil in bulk for holding in oil tanks. Each gallon of oil bought earlier in the year will give a saving on a gallon of oil bought later that year, but to ensure savings, you need to spot cheaper periods in the market price of oil.
What is more, stocking up on oil protects your company the next time there is a tanker strike or another crisis that limits your ability to continue trading. At any rate, now is a good time to buy a lot of oil, and store it in our oil tanks.
