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Biden and the gas prices: There are ‘no bad actors’ in the oil market: Analyst, Stephen Schork

Yahoo Finance Video

Stephen Schork The Schork Group Principal joins the Yahoo Finance Live panel with the
latest on the oil markets.


By Yahoo Finance

NEW YORK
Petroleumworld 09 20 2021


Video Transcript

EMILY MCCORMICK: 2022 but on the flip side, the primary alternative to that is that consumers might think inflation is going to be long lasting, which would actually lessen their resistance to rising prices and increase demand for higher wages. So all in all, I think the big takeaway here, Zack, is that consumers are making note of rising inflation but we'll have to see going from here whether this proves to be transitory. And whether consumers actually buy into the fact that inflation may ultimately peter out as we move through this recovery, guys.

ZACK GUZMAN: All right, Emily McCormick bringing us the latest there on consumer sentiment, appreciate that. Of course, a big piece of that has been rising prices and we've seen that in some of the categories that Americans do indeed spend on, and that would include gas prices. Interesting comments coming from President Biden yesterday about gas prices. We've seen those rise earlier this week the national average hit $3.19 a gallon. That was the highest that we've seen since 2014. And President Biden was indicating that it could be due to some fishy business, some cynical bad actors in the energy space. Take a listen to what he said.

JOE BIDEN: We're also going after the bad actors and pandemic profiteers in our economy. There's lots of evidence that gas prices should be going down but they haven't. We're taking a close look at that.

ZACK GUZMAN: For more on what exactly is going on with prices at the pump, want to bring on Stephen Schork, The Schork Group principal joins us here. And Stephen, you know, we were talking about this before we started the show here about President Biden and what his views on the energy space has been. But I guess accusing the energy sector of potentially being behind some of those prices we're seeing increase, what's your take?

STEPHEN SCHORK: Well, Zack, you know, unlike the president's son, Hunter, I am actually an expert in the energy industry. And the president claiming that there's lots of evidence, well to put it in the president's parlance, that's all malarkey. This is the typical playbook that we get out of the Democrats every time we see high energy costs.

I was writing about this three months ago to clients, telling them to be prepared. Eventually with the rise of inflation, which part of that is energy, eventually the White House is going to ignore all of the policies, all of the rhetoric that we've heard for the past year that has caused a good deal of this price inflation at the pump. They're going to ignore all that and they're going to turn around and what? Blame big oil.

So here we go. This is highly predictable. We saw it coming months ago. And again to repeat, there is no evidence, it is all malarkey. Let's keep in mind that we had a pretty big hurricane that hit the Gulf of Mexico refinery epicenter at the end of August.

Over the past two weeks still, 28% of US crude oil production is still shuttered. We've lost 26 million barrels over this time of absolute crude production. To the point where over the summer instead of going to Texas, instead of going to North Dakota, instead of going to the States, and to Canada to ask them to produce more oil, what did we do? We went to OPEC. We went to Saudi Arabia, Iran. We went to Russia to ask them to increase crude oil production.

So this is clearly being driven by politics and by a severe disruption to the supply of oil. There is no, and I repeat, no, manipulation. There are no bad actors in this market. The only bad actors are the policies coming out of this White House that are helping to drive oil prices higher.

AKIKO FUJITA: I mean, with that said, I don't think there's any indication the Biden administration is going to take their gas off the pedal in terms of this transition to cleaner energy, pulling back on oil production. If that's the case, if you take the dynamics at face value as you've laid them out, how much higher do you think oil prices go?

STEPHEN SCHORK: Well, we are certainly setting the seeds down the road for going back to-- and I never thought I'd be saying this given the fact that the United States was a major producer just two years ago-- but I never thought I would say we'd see plus $100 oil anytime in the near future. That's certainly the path we are heading on going ahead as we continue to disincentivize investment in the oil and gas industry. There is only one way to go.

And let's face it, oil demand is here. It's still I grant it, a twilight industry but it's not going away over the next one, two generations. And as we continue to pull back investment in this resource, there's only one way for prices to go.

ZACK GUZMAN: [INAUDIBLE] to $100 oil would be pretty significant. We've seen some upside price calls of a super-cycle from Goldman Sachs, other people who watch the market. But I mean, $100, I mean, how quickly can you get there just giving kind of we've seen demand kind of fall, a lot of eyes on China, one of the biggest users over there as their economy stumbles. Also dealing with COVID Delta issues. I mean, what's the timeline to get there?

STEPHEN SCHORK: Yeah, that's certainly a great point, Zack. Because what we saw last week I think it was, that China with the express intent of lower oil prices, started to release or threatened to release barrels from their strategic petroleum reserve. Let's keep in mind, China only has 220 million barrels in their reserve. That is a pittance. They could release all of those barrels and it will have no impact on price. This was to me, a cry of desperation with China with rising commodity prices.

So that is definitely a concern with that economy. And then, of course, with global oil demand. But in the here and now if we do not go into recession anytime in the near future-- and I'm not so sure that's an impossibility-- but down the road certainly, one, two years from now, certainly by the time Biden is running for re-election that we could be well above $100 oil.

ZACK GUZMAN: Well, I'm sure if we do see, you know, let's just say hypothetically that doesn't pan out, we see gas prices come down. I'm sure we're going to hear a lot of calls for applause on whatever the White House may have done there to fix the issue. But when we look at maybe, you know, the other things you're discussing, maybe it's a twilight industry but a lot of people have been playing the energy space this year as one of the strongest performing sectors.

And when you look at it we were seeing FAANG pop today off of the way that they've kind of announced a share buyback program. And we've seen interesting strategies for some of these energy companies as they maybe wind things down. I don't want to say that that's what they're doing but when they're thinking about returning some of this to shareholders, a $2 billion stock repurchase program giving shares a boost there. But I mean, like how do you envision the futures for these energy companies when it comes to that question of maybe if we know things are shifting to renewables, what it looks like for them to return value to shareholders?

STEPHEN SCHORK: Right. And at this point with the hard push by Western oil companies to decarbonize. We see it with the courts over in the Netherlands. We're seeing it with activists here in the United States. And once again, it paints a very dire picture for the oil and gas industry.

They're coming out of their wheelhouse. They're coming out of 100 years worth of expertise. They know what they're doing. They know how to do it in a profitable manner and in an environmentally friendly manner and a manner to be great corporate citizens to this country. But as we push for renewables, let's keep in mind, the Texas grid broke down in February, not because of natural gas, it was because renewables could not meet the demand.

Look, I am all pro-renewables. I do think it is the wave of the future. But it is not a zero-sum game. You need BTUs to be generated via gas, via nukes. And as we continue to disinvest from these fuels, we're only looking at greater volatility and a very dodgy future for oil and gas companies in the West.

ZACK GUZMAN: And you know, we've talked about the fact that you drive a hybrid here. So a foot in both camps.

STEPHEN SCHORK: Yes.

ZACK GUZMAN: We can say that definitively.

STEPHEN SCHORK: I'm all for it.

ZACK GUZMAN: Yeah. Stephen Schork coming on here. We'll see what happens with $100 oil. And we'll see what happens with gas prices as well. The Schork Group principal, thanks again for the time. Have a great weekend.

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