High price of oil better for long-term

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Bill Radke: OPEC seems satisfied with oil prices. The oil cartel meets today
and it’s expected to keep production output right where it is. In fact, yesterday Saudi Oil Minister said yesterday the current price of about $70 a barrel was “good for everybody.” But with gas in some parts of the country costing $3 a gallon, reporter Ashley Milne-Tyte wondered: Is the current oil price really good for everyone?

Ashley Milne-Tyte: Not necessarily. Stephen Leeb is chief economist at Leeb Capital Management:

Stephen Leeb: I would re-phrase it and say the current price is bad for everybody. But a different price would probably be even worse.

Leeb says today’s gas prices may be lower than last summer’s, but they’re still relatively high, especially in a down economy. But he says if oil producers were to increase production, causing the price of oil to fall:

Leeb: That would be good temporarily for U.S. consumers, but longer term it would be terrible, because longer term it would mean very, very little if any additional oil would come on-stream.

He says that’s because when oil commands less than $70 a barrel, oil producers usually won’t invest in drilling and exploration. That would lead to an oil shortage in years to come. Others say higher prices would be better for the environment, because they’d spur the development of alternative energy sources.

I’m Ashley Milne-Tyte for Marketplace.