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KAI RYSSDAL: Before we get too far ahead of ourselves to start the New Year, there are some caveats that come with that $100 mark for crude today. First, it was just a single trade on the floor of the New York Mercantile Exchange that hit triple digits. Oil closed at $99.62 a barrel in New York. That was a record, by the way. The other thing to remember is that little thing called inflation. Back in 1980 crude hit what would be $101.70 in today’s money. But still, 100 bucks is 100 bucks. And it’s a number to reckon with economically-speaking. So we asked Marketplace’s Steve Tripoli to get us a sense of whether prices this high might be here for a while. And if they are, what that might mean.
STEVE TRIPOLI: Addison Armstrong of Tradition Energy thinks oil prices may briefly burst higher from here. But like plenty of other analysts he predicts that this year’s average oil price will wind up much lower — closer to $75 a barrel.
ADDISON ARMSTRONG: I think that will be driven by a reduction in demand, not only from the U.S. but as the U.S. slows I would expect that we’ll see economic slowdowns in China and India.
Armstrong says Americans are already cutting back and not just on oil. He thinks final holiday sales figures will prove disappointing. And he adds that Americans are already eating out less as well as buying less gasoline.
ARMSTRONG: All those things are telling myself and my colleagues that oil prices have now been too high for too long, and the U.S. consumer can no longer support prices at these levels.
Analysts say high oil prices often seed their own decline. People don’t want to pay — or can’t — and producers respond by adding supply.
But if that consensus is wrong and oil stays high, the risks of a recession rise. And in this already fragile economy the worry is it could be a nasty one.
I’m Steve Tripoli for Marketplace.
RYSSDAL: Dana Perino…the president’s press secretary…said today the White House isn’t inclined to tap into the Strategic Petroleum Reserve to push prices lower. And the Department of Energy announced it’s going to keep on buying crude to bring the SPR up to its full capacity.