Curb Your Conspiracy Theories on Gas Prices
STEVE INSKEEP, Host:
Plenty of people have wondered if there could be a link in gas prices and politics, so we put the question to Vijay Vaitheeswaran. He's a correspondent for The Economist. Welcome to the program.
VIJAY VAITHEESWARAN: Good to be here.
INSKEEP: Could the timing of this dramatic drop really be a coincidence?
VAITHEESWARAN: The U.S. gasoline market is determined by many factors, most importantly the world oil markets.
INSKEEP: Although, wait a minute. We're talking about the price of gasoline, which is a little different than the price of crude oil. Oil companies have assured us over the last couple of years that the price of crude oil doesn't have a lot to do with it. It has to do with their refinery capacity and a lot of other things that are beyond their control which would keep driving prices upward. What's happening that would suddenly drive them down now?
VAITHEESWARAN: Well, what happened? We didn't have a crisis. And so market conditions are exerting themselves and that external shock that could always happen in oil, the dog that could bark, it hasn't been barking of late.
INSKEEP: Does a major oil company or an oil-producing nation have the power to move the oil price a little bit up or down depending on how they trade, how they sell, how they buy?
VAITHEESWARAN: OPEC is very concerned that there might be a price collapse. So I think you might see the Saudis actually cut their own oil production in coming weeks and that would of course help prop up prices.
INSKEEP: Weren't there reports that BP was under investigation for manipulating energy prices?
VAITHEESWARAN: I mean we think of Exxon, the biggest Fortune 500 company, as a colossus. Exxon is one-twentieth the size of Saudi Aramco, which is a Saudi oil company. Most of the world's oil, almost 90 percent, is in the hands of the government companies, not Exxon, not BP, not Chevron.
INSKEEP: So you mentioned one factor behind the change in oil prices, that there was anxiety earlier in the year that drove them up and now that anxiety is abated somewhat so the prices go back down. Has anything fundamental, though, changed about the oil market that has pushed oil prices to such high levels over the last couple of years?
VAITHEESWARAN: So it's that mismatch that explains the oil price rises over the last five years and I think the market will remain tight. We're in a much more volatile and dangerous world when it comes to oil and we don't have a safety net.
INSKEEP: Vijay Vaitheeswaran of The Economist, author of Power to the People. Thanks very much.
VAITHEESWARAN: It's a great pleasure.
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