Our new Marketplace Crash Course is here to help. Sign-up for free, learn at your own pace.
Jeremy Hobson: Well if you’ve been to a gas station recently, you know that prices are down — on average, about 20 cents lower per gallon than a month ago. That’s in part because the price of oil is at an eight-month low.
For more, let’s bring in Sarah Emerson, president of Energy Security Analysis. Good morning.
Sarah Emerson: Good morning.
Hobson: So, are these oil prices that are going down just a reflection of a weakening global economy, or is there more to it than that?
Emerson: I think there’s a little bit more to it than that. The global oil market is actually very well supplied — indeed, oversupplied. And when you add to that concerns over the eurozone, it adds to the weakness and makes pricing go further down.
Hobson: Several months back, we had a spike in oil prices because of concerns about Iran — now that oil prices are coming down, does that mean that concern is gone?
Emerson: No, I think concern about Iran remains. The issue about Iran is: are we prepared to manage a reduction in their exports. And their exports have definitely come down as their importing countries have reduced imports from Iran. But as you know, the sanctions really begin to bite on July 1st.
And so in the interim, other producers — notably Saudi Arabia — have increased production very dramatically in order to build up inventory. We now have fairly high inventory, so the concern over Iran is still there, but our market is better able to manage a disruption.
Hobson: Sarah Emerson is president of Energy Security Analysis. Thank you so much.
Emerson: You’re welcome.
There’s a lot happening in the world. Through it all, Marketplace is here for you.
You rely on Marketplace to break down the world’s events and tell you how it affects you in a fact-based, approachable way. We rely on your financial support to keep making that possible.
Your donation today powers the independent journalism that you rely on. For just $5/month, you can help sustain Marketplace so we can keep reporting on the things that matter to you.