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Why oil prices are relatively high right now

ARI SHAPIRO, HOST:

Oil prices have been climbing for months, raising concerns about what that means for the economy. But prices at the pump are actually dropping. NPR's Camila Domonoske is here to explain.

Camila, why have oil prices been under scrutiny lately?

CAMILA DOMONOSKE, BYLINE: Yeah. So the big run-up - prices are up about 30% from this summer, and that's largely thanks to Saudi Arabia and Russia, which had some pretty successful efforts to restrict supply in order to push prices up. Prices actually flirted last week with the psychologically significant hundred-dollar mark. And high oil prices - obviously, they raise inflation concerns. They make more money for oil companies. Ellen Wald's at the Atlantic Council.

ELLEN WALD: Some of the oil CEOs seemed a bit excited about the prospect of triple-digit oil, though consumers certainly wouldn't.

DOMONOSKE: Spoiler alert - oil did not actually hit triple digits. It pulled back into the low 90s after some concerns about the global economy sort of pulled back prices. But still, oil is relatively high right now, and some people think it could still go higher.

SHAPIRO: But here's the counterintuitive part - what does it mean for drivers?

DOMONOSKE: Yeah. So normally, when I'm on here talking about oil prices - all right? - oil prices went up. We refine crude oil into gasoline, so gas prices are about to go up, too. But this time, gasoline prices have been holding pretty steady in most of the country for the last two months, and now they're going down. A whole bunch of things that are pushing gasoline prices down - you've got the end of summer, so we drive less here in America. We're switching to a cheaper blend of winter gasoline. Some refinery problems were resolved. And, basically, all these things managed to counterbalance the rise in crude prices and now actually are going to push gas prices down. At the same time, there are other ways that oil prices affect people. Amrita Sen is an energy analyst.

AMRITA SEN: Diesel, yes, remains very, very high, and that will be a negative impact over time.

DOMONOSKE: So diesel prices affect shipping because that's what we use to fuel the big trucks. Jet fuel similarly has ripple effects, and these things - as Sen notes, they'll take time, but they do filter through to prices.

SHAPIRO: How much oil does the world actually use? It's obviously a huge contributor to climate change. Are people actually reducing the use of oil to address that problem?

DOMONOSKE: We use so much oil. It's about 100 million barrels per day right now. And despite those concerns about climate change, it is still growing globally. And the question is if and when, crucially, is that actually going to change, right? So really interesting week in the oil industry - the head of the UAE's oil company, who is also, rather controversially, going to be the head of the U.N.'s big climate meeting in a couple of months - it was a big oil conference this week. And he talked about all the investment in renewables, the rise of electric vehicles. He called the phase-down of oil inevitable.

But, Ari, inevitable is not the same as soon, right? Climate groups say we need to reduce oil significantly by 2050 to avoid the worst effects of climate change. And a recent Dallas Fed survey of American oil producers asked how much oil they thought we would use planetarily by 2050. Two-thirds thought it would be as much as today or even more. So the view in the oil industry is that oil is not going anywhere.

SHAPIRO: NPR's Camila Domonoske, thank you.

DOMONOSKE: Thanks, Ari. 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.

Camila Flamiano Domonoske covers cars, energy and the future of mobility for NPR's Business Desk.
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