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How High Can Oil Prices Go?

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How High Can Oil Prices Go?

Economy

How High Can Oil Prices Go?

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ALEX CHADWICK, host:

From the studios of NPR West, this is DAY TO DAY. I'm Alex Chadwick.

MADELEINE BRAND, host:

I'm Madeleine Brand.

Coming up, the curious little car that made green cool. We'll find out how the Prius came to be.

CHADWICK: First though, if you're one of the gas stingy types who actually drives a Prius, perhaps you've not been feeling quite as much pain at the pump as I have. Here in Los Angeles, for example, we're paying an average of $3.20 a gallon for gas.

BRAND: Oh, Alex, get that bicycle out. That is largely because of the surging oil market worldwide. Prices for oil set an all-time record today: $94 a barrel.

CHADWICK: Which is about three times or it was seven years ago, when President Bush took office. Predicting where prices will go short-term is always tricky. Nonetheless, energy economist Philip Verleger is going to try.

Dr. PHILIP VERLEGER (PKVerleger LLC): I suspect probably for this quarter they will average $90 a barrel and they may touch briefly $100 a barrel, but they will remain high.

BRAND: Analysts like Verleger blame short-term price spikes on everything from tension in the Middle East - will the U.S. invade Iran, will Turkey launch attacks into northern Iraq? - to the weakness of the American dollar.

Long-term, though, Philip Verleger says the outlook is a cinch to predict.

Dr. VERLEGER: I start from the proposition the long-run outlook for prices is much higher due to the continued economic growth in Asia, continued economic growth almost every place but the United States, and the very slow expansion in supply in most areas of the world.

CHADWICK: And with global economic growth, expected to go on at 4 or 5 percent a year, oil investment adviser Stephen Leeb says there's a limit to what we can do to control oil prices.

Dr. STEPHEN LEEB (Author, "The Oil Factor"): Even if we do conserve here, which we will, and Europe and the other developed countries conserve, the fact that the developing world is unable to conserve - they need to grow - is going to increase oil demand, is probably going to continue to overwhelm the oil markets and lead to, I think, continually higher prices.

CHADWICK: That's the view from Stephen Leeb. He wrote the book "The Oil Factor."

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