Oil prices expected to climb again

Prices over $3.50 per gallon at a San Francisco gas station on May 7, 2007.

TEXT OF STORY

KAI RYSSDAL: Oil prices dropped 19 cents today to finish just above $80 a barrel. It's the third day in a row crude's settled lower. But three days do not a trend make. In fact, Marketplace's Alisa Roth tells us some speculate prices could be well higher by the new year.


ALISA ROTH: It was only two years ago experts were wondering what would happen if oil hit $50 a barrel. Now, they say, it's a matter of when, not if, the price hits double that. Jerry Castellini is president of Castle Ark Management:

JERRY CASTELLINI: Trying to pick a specific date and time in the next six to 12 weeks is kind of silly, but we do know that the world economies are growing faster than people expect -- and we do know world oil production is not keeping pace.

So what happens when oil does get to $100 a barrel? We've heard the speculation about the consequences of record prices before: People will stop driving! The economy will collapse!

Kenneth Medlock is at the Baker Institute for Public Policy at Rice University. He says the economy's still standing and people are still driving. But high prices are changing consumers' tastes.

KENNETH MEDLOCK: Think about five years ago -- did you see any advertisements by major car companies that, you know, over half of their vehicles get 30 miles to the gallon or better?

Medlock says people are buying more fuel efficient cars. But the American consumer is increasingly just one small piece of the world economy. It'll take a lot more than better fuel efficiency to really cut global demand and push prices back down.

In New York, I'm Alisa Roth for Marketplace.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...