OPEC expected to announce increases in production
A man walks past the headquarters of the Organization of the Petroleum Exporting Countries (OPEC) in Vienna.
JEREMY HOBSON: Now let's get to oil. The Organization of Petroleum Exporting Countries -- or OPEC -- meets tomorrow in Vienna. And they're expected to announce an increase in production. Meanwhile there are reports this morning that the biggest OPEC producer, Saudi Arabia will boost its own oil output no matter what the full cartel decides to do.
Juli Niemann is an analyst with Smith Moore and Company. She's with us live from St. Louis as she is every Tuesday. Good morning.
JULI NIEMANN: Good morning Jeremy.
HOBSON: Well, Juli is an increase in production by OPEC really the answer to our oil price problems?
NIEMANN: Well, everybody's looking ahead to the second half of the year, not the supply and demand right now. Because right now we still have plenty of supplies, and demand is still fairly weak. As far as OPEC increasing their production, it would basically put enough into the supply system to keep it from going over $100 a barrel. They're very afraid that keeping it over $100 a barrel will just kill total global demand for it.
HOBSON: And Juli, a lot of people have mentioned speculators as one of the reasons why oil has stayed so high. Is that your view?
NIEMANN: Absolutely true. You know it's an alternative currency kind of like black gold. The debt limit is likely to pass, so the dollar is going to go down, and oil and gold will go up. So you're looking at an alternative currency here. And a lot of the trading is in paper barrels: commodity funds, exchange traded funds and derivatives that's far in excess of what the physical supply is.
HOBSON: And do you think that the economy can get going again if oil prices remain as they are now, or go even higher?
NIEMANN: Well, oil is really a tax. It can slow growth, but it doesn't kill it. The killers in the United States are jobs and housing and those are the biggest single hits to consumer spending. So oil just adds fuel to the problem. It really isn't the killer for the economy.
HOBSON: What do gas prices look like where you are Juli?
NIEMANN: Right now, we're down to a very modest $3.59.
HOBSON: That does sound like a deal. Juli Niemann, analyst with Smith Moore and Company, thanks as always.
NIEMANN: You bet.