Don’t get too used to lower gas prices

Nancy Marshall-Genzer Oct 17, 2008

Don’t get too used to lower gas prices

Nancy Marshall-Genzer Oct 17, 2008


Kai Ryssdal: Oil prices jumped a couple of bucks today, back up to almost $72 a barrel. Part of that was a sense that maybe yesterday’s dip wasn’t real. But the bigger bump by far came from whoever’s in charge of scheduling OPEC meetings. The cartel’s going to hold an emergency meeting next week, and the expectation is for a cut in production by the cartel.

Sure low oil prices are nice. But they’re not necessarily good for OPEC countries. And if it’s not good for them, it’s not going to be good for us in the long run.

As Marketplace’s Nancy Marshall Genzer explains.

Nancy Marshall Genzer: Oil prices aren’t just on a roller coaster. Lately, prices are acting more like the Giant Drop at Six Flags. [sound of people screaming on a roller coaster ride]

Yeah, it’s been a fun ride, but we need to curb our enthusiasm about falling oil prices. Now, I’m not asking you to feel sorry for OPEC. Just listen to how very low, volatile prices play out. They’re a nightmare for oil producers everywhere deciding whether to invest in new oil fields. Bruce Bullock heads up Southern Methodist University’s energy institute.

Bruce Bullock: If you’re looking at a major, let’s say, offshore project, you’re looking at five years before it probably produces a barrel of oil.

If OPEC countries don’t invest in new fields, prices will skyrocket when demand increases. There won’t be enough oil. And we’ll still be dependent on OPEC, because cheap oil discourages alternatives. Lou Pugliaresi is president of the Energy Policy Research Foundation.

Lou Pugliaresi: Where we go through another huge cycle of very low oil prices squeezing off investment, followed by very high oil prices bringing in more investment.

And low oil prices could lead to unrest in OPEC countries. Stephen Schork of the Schork Report says OPEC governments use oil money to subsidize staples.

Stephen Schork: The government simply isn’t going to have enough money to keep fuel prices low, to keep grocery prices low.

OPEC countries can’t risk unrest. That could threaten production. For us, it would mean higher prices.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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