Gas Pump

Dreamstime

What Is Driving Oil And Gas Prices To Go So High?

May 07, 2018 - 8:58 pm

NEW YORK (WCBS 880) -- Oil prices have jumped 10 percent in the past month, and in turn, gasoline prices are on the rise.

Speaking to WCBS 880’s Michael Wallace Monday afternoon, oil analyst Tom Kloza said there are two factors pushing oil prices higher.

“Number one is the expectation that the middle third of this year globally, you’re going to see demand outstrip supply by about a million barrels a day. But the real catalyst recently is Iran, and the notion that we could reimpose sanctions, or make it difficult for Iran to export as much crude as they’ve been exporting for the last couple of years or so,” Kloza said.

At 2 p.m. Tuesday, President Donald Trump is set to announce his decision about whether to pull out of the Iran nuclear deal.

“That’s really going to be a telling moment for the market,” Kloza said.

The expectation for the markets is that the U.S. will pull out of the Iran deal, or will “make life a little bit more miserable for Iran,” Kloza said.

“The question is how bellicose is the narrative, and, you know, how resolved are they to really put in some punitive measures,” he said. “Now, we could also have a little bit of the buy the rumor, sell the fact, and the fact comes tomorrow. You know, prices are high now. They’re not going to remain high forever. And it wouldn’t surprise me if maybe we’re in the seventh or eighth inning of this rally.”

Meanwhile, Kloza said U.S. oil production is booming, though it won’t all be for domestic use.

“U.S. oil production is gangbusters. We’re blasting through record numbers every week. As a matter of fact, right now, we’re producing about twice as much as we produced during the first Arab Spring, when oil prices went back to $80 to $100 a barrel, and it’s going to continue to increase,” he said. “The difference, and the thing that people don’t understand, is that we’re going to export probably 2, 3, or 4 million barrels a day of that additional production as we move forward in the next few years.”

The prices at the pump can be expected to hit their highest level since 2014, but nowhere near as high as gas prices actually were that year – which was about $3.50 per gallon, Kloza said. Still, drivers will notice the difference compared with recent years.

“Unfortunately, for motorists, you can look at this driving season – which we’ll say begins about now and ends Labor Day – and most people are going to have to pay about $200 more for gasoline driving the same miles this driving season, and about 250 more than 2016. So nowhere near as cheap as we’ve been fortunate enough to see in the last couple years,” Kloza said.