The OPEC+ alliance meets in Vienna to consider a cut in oil production
A MARTINEZ, HOST:
You know, a lot of people may talk of a future of electric cars and solar panels, but the reality is that much of the world still runs on oil. And today's meeting of oil producers could affect everything from gas prices to the world economy to the war in Ukraine.
STEVE INSKEEP, HOST:
OPEC+ is a cartel of many oil-producing nations. Giant producers like Saudi Arabia meet today considering a big cut in oil production. The rules of supply and demand suggest that less production leads to higher prices, which would cause pain almost everywhere in the world except the Kremlin. OPEC member Russia is a big oil producer and wants higher prices to finance its invasion of Ukraine.
MARTINEZ: NPR's international affairs correspondent Jackie Northam is here.
Jackie, what kind of change are they planning, and how would it affect the markets?
JACKIE NORTHAM, BYLINE: Well, as you say, the alliance is meeting today in Vienna, and the word is that they're considering cutting 1 million barrels per day, and that's about 10% cut in what the alliance normally produces. There's speculation it could go up to 2 million barrels. And, you know, this move is seen as a bid by Saudi Arabia to prop up prices during the spring. And as the Ukraine war started, they were getting about $120 a barrel. But then came the slowing global economy. And the price fell to less than $90 last month.
I spoke with Yasser Elguindi, who's an analyst with Energy Aspects, and he says Saudi Arabia is trying to correct that price. But he says the magnitude of the proposed cut has really caught people by surprise. Let's have a listen.
YASSER ELGUINDI: OPEC is trying to shock and awe with a big production cut number that is going to get people's attention. And they're trying to support prices to keep them from falling further. That's the takeaway of all this.
NORTHAM: And Elguindi says it seems the Saudis are trying to push prices back to about $100 a barrel or more. But we don't know what OPEC+ is going to do. They're probably haggling right now, and the U.S. could be urging them not to make this move.
MARTINEZ: Yeah, because if supply is cut, then prices go up. How much, though? - because here in L.A., where I'm at, 6.50 a gallon. That's already shaping some of my holiday decisions. What's this going to mean?
NORTHAM: Well, we'll have to wait and see exactly what OPEC+ is going to decide on. You know, look. If it is a million barrels, we're going to see prices go up for sure, something similar to what we saw in the summer. But we don't know what happens if they go beyond that. And the other issue is how this will affect energy prices worldwide. European countries in particular are already having a big problem with soaring prices for homes and businesses. And this will add on to that.
MARTINEZ: Then what would price increases say about U.S.-Saudi relations?
NORTHAM: Oh, this would be a rebuke to Biden. You know, he's been heavily criticized for meeting with Crown Prince Mohammed bin Salman, who he blamed for involvement in the death of Saudi journalist Jamal Khashoggi. And, you know, all that meeting last summer got was a small increase in production. Now, Saudi Arabia is annoyed because there's been a flood of oil from emergency stockpiles, and most of that from the U.S. Strategic Petroleum Reserve. So this potential cut could be Saudi Arabia's way of saying, look, it's had enough of the release of reserve stockpiles, which are keeping prices lower.
MARTINEZ: And one other thing - Russia co-chairs OPEC+. How would this decision affect them?
NORTHAM: Well, Russia's economy is based on energy revenues, which is now critical to its war effort in Ukraine. And certainly a deep cut in production means more money for Russia.
MARTINEZ: NPR's international affairs correspondent Jackie Northam - Jackie, thanks.
NORTHAM: Thank you.
NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.