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OPEC members to meet as crude oil prices reach 7-year highs

STEVE INSKEEP, HOST:

Representatives of OPEC meet today. The cartel of oil-producing nations meets as oil prices soar around $90 per barrel and could go higher. NPR's Camila Domonoske will be watching that meeting and joins us. Good morning.

CAMILA DOMONOSKE, BYLINE: Good morning.

INSKEEP: When we talk about $90-per-barrel oil or $100-per-barrel oil, what does that mean, you know, for me when I'm filling up my car, doing whatever?

DOMONOSKE: Yeah, I spoke to Muqsit Ashraf. He's with the consulting firm Accenture. He summed it up like this.

MUQSIT ASHRAF: Energy powers the global economy, and higher energy prices are felt by the consumer instantaneously.

DOMONOSKE: You know, you mentioned gasoline prices. High crude prices push those up. When transportation costs more, it drives up the cost of everything that gets shipped around. We've also seen volatility in natural gas prices, which can drive up heating and electricity costs. All of this contributes to inflation. So, yeah, it has a really big impact. And if markets stay the way they are now, which is always hard to predict, but we could be looking at energy prices that are elevated, you know, for a good chunk of time here.

INSKEEP: OK, so some of this is intuitive. The economy is growing, certainly unlike it was doing a couple years back at the beginning of the pandemic. And so when the economy grows, people use more energy, the price goes up and so forth. But...

DOMONOSKE: That's right.

INSKEEP: ...That surely can't explain all of it. What's going on here?

DOMONOSKE: Yeah. Two other things - one, geopolitical tensions. This meeting today involves OPEC and its allies. So if you think about who's at the table, it includes Russia, right? Everyone's watching the situation in Ukraine. And Saudi Arabia, UAE - there's this conflict with the Houthi rebels. These things are a factor in prices. But the big reason here why we've seen prices come up is that supply just isn't keeping pace with the demand that you cited. And hypothetically, OPEC and its allies could decide to change that, but it's really not at all clear if they will.

INSKEEP: Sometimes they do agree to requests from consuming countries to pump more oil. Why wouldn't they do that now?

DOMONOSKE: Well, a few of them can't. Some OPEC members like Nigeria are going flat out right now and can't meet their targets for oil production. But a lot of other players don't want to pump more. You know, I spoke with Ashraf from Accenture right after he got back from a trip to the Middle East.

ASHRAF: You know, frankly, there's a little bit of getting comfortable for now with the pricing that those countries are enjoying.

DOMONOSKE: Basically, if they pumped as much oil as they possibly could, that would indeed push prices down. And why would they do that when they're making so much money off of these high prices?

INSKEEP: There's always a political debate about whether climate policies are in some way affecting the price of oil by discouraging more production or making it more difficult or more expensive. Is there any connection between climate policies around the world and the prices we're seeing?

DOMONOSKE: Yeah, the analysts I've spoken to say this isn't the primary driver of high prices right now, but it could be a factor, right? If companies are being pressured by government and by investors to pump less oil, and that happens before the world actually uses less oil, then that widens the gap between supply and demand. But there's something else that's happening right now in terms of pressure on companies to pump less, and that's that they're actually hearing from shareholders, hey, all this money that you're getting from high prices, give it to us - right? - instead of investing it in new production, which would push prices down or spending it on green investments, which would have big implications for the climate. You know, we're seeing companies like Exxon and Chevron, they're making massive profits, and so far, they've put most of them toward big fat dividends for shareholders.

INSKEEP: Camila, thanks for the insights.

DOMONOSKE: Thank you.

INSKEEP: NPR's Camila Domonoske. Transcript provided by NPR, Copyright NPR.