OPEC meeting ends without production increase, markets react
OPEC headquarters in Vienna
BOB MOON: Interested in buying a barrel of crude oil? Well, in New York, it'll set you back more than $101 this morning. The price is about $1 higher, mostly the result of a chaotic OPEC meeting in Vienna. The oil cartel rejected international calls to pump more oil -- and in fact the summit ended so badly, some called it the 'worst OPEC meeting ever.' That's not good news for consumers.
Joining us live from London is Marketplace's Stephen Beard. Good morning, Stephen -- are price at the pump likely to head back up now?
STEPHEN BEARD: Oh absolutely, it's reckoned for every $1 increase in the price of a barrel of oil, that'll mean an extra 2.5¢ a gallon at the pumps. Overall, that $1 increase will cost U.S. consumers $1 billion a year. And it's worth noting Bob, most of the recessions in the West were largely triggered by a sharp rise in the price of crude.
BEARD: You know after the meeting, though Stephen, Saudi Arabia actually announced they'd pump their own oil and boost production. In theory, that should lower prices, yes?
MOON: Yes but there's an interesting point here from Philip Verleger, a veteran oil industry watcher. He says the Saudis are playing a double game. Under pressure from the U.S. they go the OPEC meeting, they call for an increase in output to put a lid on oil prices. But with rather less fanfare, they cut the discounts that refineries get when they buy Saudi oil. So, the Saudi's are actually pushing up the price of oil. So, Philip Verleger says, yes they're happy to pump more oil but at a higher price.
PHILIP VERLEGER: They're not in the business of providing oil cheaply to the United States or to any other consumers. They are in the same business as you and I are -- trying to maximize our wealth. They just do it quietly rather than very publicly.
And he says the Saudi's have brilliantly managed the price of oil since March 1999 when it was just $10 a barrel.
BEARD: Marketplace's Stephen Beard in London. See if you can find us some better news next time.
MOON: OK Bob.