0

Price of oil rises slightly above $100 a barrel

Saudi Arabia is using a steady hand to ensure stable prices of oil, even if that means increasing supply. Here, a Saudi Aramco (the national oil company) oil installation known as 'Pump 3' burns brightly during sunset in the Saudi Arabian desert near the oil-rich area Al-Khurais.

Kai Ryssdal: Speaking of oil, as we are, prices have been on the rise of late. It's due mostly to rumblings of a western boycott of Iranian oil and the reciprocal threat from Tehran of a blockade of the Persian Gulf and Strait of Hormuz.

Today, though, Saudi Arabia -- the world's biggest exporter of crude -- promised to do what it takes to keep prices about where they are now, around $100 a barrel or so.

We asked Marketplace's John Dimsdale to find out why.


John Dimsdale: The Saudis have reassured oil importing countries that even if they go ahead with a boycott of Iranian crude, their demand for fuel will be met and prices will stay stable.

Philip Verleger with the Peterson Institute for International Economics says it’s simple self-interest.

Philip Verleger:  Saudi Arabia is very aware excessively high petroleum prices will accelerate movement away from oil.  And they understand that a price spike that might be caused by some irrational Iranian action would hurt their long-run financial interest. 

Affordable oil benefits the U.S. economy too, encouraging growth while keeping inflation at bay. But is $100 a barrel affordable?  

Steve LeVine: This is not a great gift to the world. That’s a high oil price. 

Steve LeVine at the New America Foundation says the last time the Saudis pegged the price, it was $75 a barrel. He says the Saudi government needs more oil income, ever since the Arab Spring. 

LeVine: The Saudi king has thrown a bunch of social spending at his people to tamp down any possibility of an uprising. The estimate is the break even point for Saudi Arabia for that spending is around $85 to $90 a barrel oil.

LeVine says if Iranian tensions ease and Nigeria deals with its supply disruptions, oil prices could fall as much as $20 a barrel.

In Washington, I'm John Dimsdale for Marketplace.

About the author

As head of Marketplace’s Washington, D.C. bureau, John Dimsdale provides insightful commentary on the intersection of government and money for the entire Marketplace portfolio.
Log in to post0 Comments
With Generous Support From...