There’s high drama in the oil world right now. Last year, we saw prices go negative as a glut took over the world. Annual production fell by record amounts. Last week, though, prices shot up after oil-producing countries decided they would keep production low.
That is, the oil cartel OPEC, led by Saudi Arabia, announced last week that it’d maintain lower production levels. Since those major oil-producing countries are drilling less, there’s less oil out there, and prices are going up.
But this is happening amid a lot of uncertainty right now. First off, OPEC is only doing this through April.
“What the OPEC+ group is doing now is making decisions month by month, so we don’t know what they’re going to decide when they meet in April as to what they do for May,” said Judith Dwarkin with the energy market and analytics company Enverus.
The move also risks creating more instability in the long run.
Higher prices mean more cash for oil producers in the Mountain West. However, oil producers have said they won’t spend as much on new production this year to reduce the global oil glut and bolster prices.
But what if high oil prices tempt them into producing more again?
“The problem with prices scooting up as fast as they have as far as they have is there is a real risk of overheating,” Dwarkin said.
That is, the prices are hot and producers could start drilling more later this year or next year, but consumers are starting to use less because of high prices. That mixture could land us in another glut and a return to bottom-of-the-barrel prices.
On Sunday, the price of Brent crude, the global benchmark, briefly exceeded $70 a barrel for the first time since before the coronavirus pandemic began.
This story was produced by the Mountain West News Bureau, a collaboration between Wyoming Public Media, Boise State Public Radio in Idaho, KUNR in Nevada, the O'Connor Center for the Rocky Mountain West in Montana, KUNC in Colorado, KUNM in New Mexico, with support from affiliate stations across the region. Funding for the Mountain West News Bureau is provided in part by the Corporation for Public Broadcasting.