NPR Launches Series on Oil Prices
JACKI LYDEN, host:
Well, this could be it. This could be the week that oil finally hits a $100 dollars a barrel. The price closed Friday in New York above $96, and it's been climbing relentlessly for months.
We've invited NPR's business editor Uri Berliner to take a look at the weeks ahead on the markets and in our coverage.
Welcome to the program, Uri.
URI BERLINER: Hi, Jacki.
LYDEN: So here it is, just in time for the holidays, a march towards a $100 a barrel. What's pushing it so high?
BERLINER: It's probably the last thing people want to see coming up in this holiday season. But most analysts, most everyone would agree that it's because of growth in the global economy. The economy in the last couple of years had been quite strong in places like India and China, in particular, they have this tremendous thirst for energy as their economies improve and more people move into the middle class.
I think you're also seeing some other factors. One that's cited is something called a security premium. That there is an extra $10 or $15 built into the price of oil, not because of any real disruptions in the supply of oil, but because of the fear that something could happen. There could be an attack somewhere in the world in the Middle East. So there's sort of a bad hedge - that something bad could happen.
Also, the dollar has been falling in value against other currencies. And the major oil producers in the world are paid in dollars. If they're paid in dollars, and then their buying power decreases, that gives them the motivation to increase prices even more.
LYDEN: Now, it might have some psychological significance, but it seems to me that people were wincing some while ago. Are oil prices really hurting us? Or we'll just absorb this as a normal course of business?
BERLINER: We've been wincing for a really long time now. You know, a little more than five years ago, oil is at $22 a barrel. And if you had said to any economist at that time, you know, in 2007, oil is going up floating around a $100 a barrel, they would have said - at best, recession; at worst, economic calamity.
But the price has steadily increased - 50, 60 on upward. And I think what we've learned about this is that - in the U.S., at least - we're not as reliant on energy as we used to be in a funny way. Our economy has shifted from the last time there's a big oil shock in the early '80s from an industrial economy, largely, to a knowledge, information, service economy.
LYDEN: Uri, if the high prices haven't yet had a major effect on the economy, what's the most profound effect globally of $100-a-barrel oil?
BERLINER: One thing that's happened is that it's made some countries - some governments - extremely wealthy almost beyond description. Three-quarters of the world's oil reserves now are controlled not by multinational corporations but by state-owned oil companies in countries like Iran, Saudi Arabia, Russia, Venezuela. And it's made these countries perhaps a lot more influential than they would have been if the prize of oil were $30 a barrel.
LYDEN: Now, you're going to be looking at this on the business desk this week on a couple of our shows. What's going on?
BERLINER: Well, we're going to be doing a number of stories - starting tomorrow morning on MORNING EDITION - how come this rising price of oil hasn't had more of an impact on our economy. That would be one story.
We're going to be looking at whether there's a tipping point where consumers are really going to be hit hard by this. And we'll start curtailing their consumer spending. There is some evidence that that's starting to happen. We're going to look at whether there's anything good about high-priced oil.
LYDEN: NPR business editor Uri Berliner, thank you very much for explaining things to us.
BERLINER: Thank you. I enjoyed it.