MARY LOUISE KELLY, HOST:
It is summer driving season. And if you have hit the road, you've probably noticed gas is expensive right now. That is mostly due to high crude oil prices. And if you're wondering where oil prices may be going next, you're not alone, especially after an OPEC meeting ended with a big surprise.
NPR's Camila Domonoske joins us to explain. Hi, Camila.
CAMILA DOMONOSKE, BYLINE: Hi, Mary Louise.
KELLY: So a dramatic OPEC meeting - what exactly happened? (Laughter).
DOMONSKE: Well, so we have OPEC, this powerful cartel led by Saudi Arabia. And they were in a routine meeting with allies, including Russia. Collectively, they're all known as OPEC Plus. And pretty much everyone expected them to make a deal to produce more oil. They have a bunch of oil they're holding back. Prices are high. Demand is rising. It seemed straightforward. But instead, there was drama - a fight between the United Arab Emirates and Saudi Arabia. Long story short, they called off the whole meeting with no boost in output.
KELLY: They called off the meeting completely. OK, so go on. Where does the story go from here? And just talk us through between the meeting that collapsed and what's playing out in the oil markets.
DOMONSKE: Yeah, well, I'm actually going to go back in time 'cause I think it's helpful to remember where this deal that OPEC has that they're negotiating over - where it came from. Last year, oil demand just disappeared abruptly, right? We all stayed home. We stopped driving. We stopped flying, which threw oil markets completely out of whack. Prices went unbelievably low basically overnight. And so OPEC Plus struck this deal to cut their production a lot. It was a way to balance out markets.
KELLY: Sure.
DOMONSKE: Now demand is coming back. We're driving. We're flying again. Here in the U.S., there were actually a record number of road trips over July 4. So now we have a different problem, which is oil supply just isn't keeping up. Louise Dickson is a senior analyst with Rystad Energy.
LOUISE DICKSON: We've seen a bit of a pivot. And now we're actually looking at - well, what is going to happen if there is a supply shortage?
DOMONSKE: So since this pivot happened, prices have been going up and up. Add this OPEC announcement and - OK, are you ready for things to get a little bit weird?
KELLY: (Laughter) Always, Camila. Let's get weird.
DOMONSKE: OK. There are actually two completely different concerns at play right now. One is that OPEC has all this infighting, so they're not going to be able to strike a new deal on oil, which means that the old deal is still in place, which cuts production so much that it would drive prices crazy high. That's the one concern.
KELLY: OK.
DOMONSKE: The other is that they might actually fight so much that they abandon the deal completely. And in that case, there's a free for all. They all produce as much oil as they want, which would flood markets and cause prices to go way down. So the market's been on a bit of a roller coaster over the last two days as everyone tries to make a sense of which of these two completely opposite outcomes we might be looking at.
KELLY: Which is more likely? Right. Well, for those of us who are just trying to ride the roller coaster of budgeting for filling up our car every week or so, where does this land?
DOMONSKE: Yeah, the big question - right? - is, how high will gas prices get? And this is something a lot of people are worried about. For one, the Biden administration, which has talked to OPEC members to try to encourage them to strike a compromise - if they make a deal, they might stabilize markets in the middle and avoid either of these two extremes, right? Long term, there's a lot of uncertainty about what this looks like over the months and years ahead. In the short term, it's much easier to say gas prices are high. They have been climbing for months. They're likely to stay high in the near term.
KELLY: NPR's Camila Domonoske, thank you.
DOMONSKE: Thanks. Transcript provided by NPR, Copyright NPR.
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.
