While experts say the current rise in oil prices is largely due to a faster recovery in demand than the tight supply caused by the onslaught of winter storms, others warn that Biden‘s “hostile” energy policies are likely to drive prices higher in the long run.
As of Tuesday morning (March 9), the average U.S. gas price was $2.82 per gallon, up 34 cents from a month ago, according to Gas Buddy. Experts generally agree that consumers should be prepared for higher gas prices.
Experts: Recovering demand, tight supply push oil prices up
Jay R. Young, CEO of Dallas-based oil and gas operator King Operating Corporation, told The Epoch Times in an e-mailed statement, “The national average oil prices will likely reach $3 by Memorial Day and remain near that price for most of the summer.”
Young explained that oil prices are rising because demand is recovering, but supply is struggling.
“Gasoline demand rose last week to the highest level since the outbreak began as cases are declining and more Americans are going out to fill up more often.” Young said.
Federal data from the U.S. Energy Information Administration show oil prices have mostly risen steadily since bottoming out in early May 2020. The subsequent reopening of the summer season was accompanied by a corresponding rise in oil prices. Oil prices fell slightly in the fall as a second wave of the outbreak drove up the number of cases. But demand for gasoline continued to expand a few days ago as the vaccine rollout and continued reopening in multiple locations.
“U.S. gasoline demand rose 4.3 percent on Sunday (March 7) compared to the previous Sunday and was 18.4 percent above the four-week rolling average through Sunday (March 7).” Gas Buddy analyst Patrick De Haan tweeted on March 8.
Meanwhile, production can’t keep up.
“On the supply side, the number of active oil drilling rigs in the U.S. is nearly 50% less than at the same Time a year ago,” Young said. The most immediate impact on the current price increase came from the winter storm in February that took 26 U.S. refineries offline, he said.
Adding to the supply woes is the fact that the Organization of Petroleum Exporting Countries (OPEC) agreed last Thursday (March 4) not to increase oil production until April, with the exception of Russia and Kazakhstan. Last April, OPEC agreed to cut oil production by 10 million barrels a day to avoid a collapse in oil prices amid an Epidemic-driven drop in demand.
“Demand is recovering much faster than oil production levels, and that’s why oil prices continue to rise rapidly.” Young said.
Oil prices touched above $65 a barrel on Tuesday, the highest in a year.
“In the longer term, by the third quarter of this year, we could see prices in the range of $70 to $80 a barrel.” Young predicted.
Experts: Biden’s energy policy could further drive up prices
But some experts, such as John Hofmeister, former president of Shell Oil Company, worry that U.S. President Joe Biden’s policies could drive oil prices even higher.
In an interview with Fox Business Network last Thursday, Hofmeister confirmed that the supply crunch has had the most immediate, short-term impact on oil prices.
But, he said, something else is happening, and it’s more subtle. Oil industry producers are also being squeezed by the government.
Hofmeister said the Biden Administration‘s no-leasing policy will create a mentality in the industry that “there will be less and less available,” and that mentality will also drive prices.
“As long as we see this hostile administration, we’re going to have a price problem.” Hofmeister said.
Biden signed an executive order Jan. 27 suspending the issuance of new oil and gas lease permits in federal territory. Biden’s executive order establishes “a moratorium on new oil and gas leases on public lands or near-coastal waters to the extent possible” and initiates “a rigorous review of all existing leases and permits related to fossil fuel development on public lands and waters.
DeHaan said in a tweet last Thursday that Biden’s policies, which include canceling the Keystone XL pipeline project and suspending leasing policies on federal lands and waters, would not have an impact on prices in the short term, but would pose greater risks in the long term.
“Unlike state-owned oil companies, Biden has no say in cutting or increasing production, which (cutting or increasing production) is purely market-driven.” He wrote.