OPEC may tie oil to basket of currencies
TEXT OF STORY
STEVE CHIOTAKIS: OPEC oil ministers meet today in Vienna to set production targets for the winter. The oil cartel controls 40 percent of the world’s supply and ministers know their commodity is vital to any economic recovery, so they’re not expected to tinker with it much.
But they will look closely at another idea, as Marketplace’s John Dimsdale reports.
JOHN DIMSDALE: The global price of oil is set in U.S. dollars. But when the dollar’s value is low — as it is now — oil producers have to jack up their prices to earn the same profit.
When the dollar fell dramatically two years ago, the spike in oil prices made more costly alternative fuels more competitive, says oil analyst Stephen Schork.
STEPHEN SCHORK: So not only was OPEC not receiving the full bang for its buck, but they were also seeing the potential for their market share erode.
So OPEC ministers are resurrecting an old idea — tying oil to a basket of currencies, including the euro, instead.
Houston oil industry consultant Larry Carl says the dollar is losing its dominance.
LARRY CARL: When we look at the way the rest of the economies around the globe are recovering and we’re falling behind, we have to start getting used to the fact that we’re not going to lead right here, right now.
But if OPEC switched to this system, Carl says U.S. gasoline prices would be more susceptible to currency fluctuations overseas.
In Washington, I’m John Dimsdale for Marketplace.
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