VOL. 124 | NO. 37 | Tuesday, February 24, 2009
FedEx CEO: Use of Foreign Oil Threatens US Economy
By DONNA BORAK | AP Business Writer
WASHINGTON (AP) - FedEx Corp. Chief Executive Fred Smith said Monday that U.S. reliance on foreign oil is the biggest threat to the nation's economy after terrorism.
"The consequences of our energy dependence are real," Smith said in remarks at the National Press Club.
A major part of the financial crisis that led to the current recession was the run-up in oil prices in 2007 and last year, said the CEO of the Memphis-based provider of transportation and business services.
Smith, co-chairman of the Energy Security Leadership Council, a group of business and military leaders, backed a plan introduced in September that would encourage the use of an electrical grid to power the nation's transportation system, rather than relying mostly on foreign oil.
That electricity – whether hydroelectric, wind or nuclear – would come largely from domestic sources disconnected from volatile world markets and capable of providing more stable prices.
"No one fuel source – or producer – would be able to hold our transportation system and our economy hostage the way a single nation can disrupt the flow of petroleum today," Smith said.
While he did not name any specific geopolitical threats, Smith said the U.S. cannot continue to put the economy at risk every time a pipeline is attacked by insurgents or a hurricane threatens the Gulf of Mexico.
He warned that the days of oil reaching $147 a barrel, which it did in July, and $5 a gallon for gasoline will not be the "last oil shock we will ever see."
But prices have fallen dramatically since the summer. Oil prices tumbled below $39 a barrel Monday as traders shrugged off reports that the Organization of Petroleum Exporting Countries had slashed production, while the average price at the pump was about $1.91 per gallon, according to auto club AAA, Wright Express and the Oil Price Information Service.
Still, the best "we can do is insulate ourselves from the effects of future shocks," Smith said. The long-term strategy would save 1.8 million jobs and act as a $400 billion insurance policy for the U.S. by reducing depending on foreign energy sources, he added.
Smith acknowledged that the proposed electricity-based plan is "controversial" and faces several long-term challenges, including changing the tax code to allow companies to expense capital equipment and increasing oversight of how research and development funding is spent.
The stimulus plan signed into law by President Barack Obama last week includes $38 billion for energy projects.
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