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Duquesne University Professor Kent Moors on the factors leading to the rise in oil prices and its impact on gas prices in the U.S.
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On what is behind the spike in oil and gas prices is Kent Moore professor -- -- university an energy policy research group director.
And I can say hey you know IIIE.
I think you're listening to what Elizabeth and McDonnell was just saying about predictions for a 150 dollar a barrel oil coming as soon as this summer.
You think that boiling gas have a long way to go to catch up bridged that gap for us here why is there such a discrepancy much -- such a wide spread between -- -- is that.
And why gas prices are seeing -- -- at a faster increase in their prices up a pop.
Well.
Number one -- we've had a difference in the spread in crude oil itself.
If we take a look at what the prices for Brent oil in London vs the price in New York for -- WTI benchmark.
Brent is now about fifteen to twenty dollars more barrel.
-- it will be accelerating even further as we get closer to 1 July because 1 July is the date at which the EU.
Will impose their embargo of oil imports from Iran.
And that will definitely increase prices in Europe so number one we're looking at some geopolitical impacts that are clear to -- increasing the overall price of crude.
Secondly when we take a look at the price of gasoline in the United States there are number of factors and all of them are combining to virtually guarantee -- rather accelerating rise in price.
-- to Begin with our refinery capacity in the United States.
Is about -- 92 to 94%.
Depending upon which region you're talking about so there isn't a great deal more of refinery capacity that we could put on line.
Secondly we have our own spread considerations in the United States.
Those refineries that are more dependent upon imported crude are going to feel the brunt of the rise in the Brent prices.
While those in the midwest for example are currently profiting from huge discounts on -- crude coming from Canada.
-- in crude that's coming down from Canada is now being sold in the United States for forty.
The fifty dollars less a barrel -- what it could be commanding on the international market.
So some sectors of the economy at least short term.
Are gonna benefit from the spread long term however all the prices are going.
I intend I would love to be one -- hear your classes because you laid things out so clearly it it clearly and concisely is very evident the point that you're trying to make here -- many points that you trying to make here.
It seems very logical but what is not logical still.
Is a connection between Iran and what's happening here because we do not get our oil from -- we are not getting that Brent crude it is going to Europe or it's not going to Europe at least a couple.
Of places in near a thousand as of this weekend.
Why is it affecting -- so much more profoundly when we are not necessarily seeing -- cut off and supply from the actions there.
That's a very good questions -- the first and basic answer is this is an international integrated crude oil market.
Which means if you have a bubble someplace it's -- have an adverse impact every place else.
It is true that Europe feels the brunt of cuts and a rainy and export a -- and imports first.
But it also means that as the price rises for Brent crude in Europe the price will rise elsewhere including in the United States so even though we're not directly dependent upon -- -- -- oil.
We are still dependent upon that price differential between London and New York.
-- -- another issue we have to look out for your surprise.
Only eleven of the 27.
EU nations actually import oil from Iran but three of them are heavily dependent.
Upon -- -- and imports and unfortunately those -- the 3COM trees that currently have the biggest financial difficulties.
Greece receives directly or indirectly.
Between thirty and 33%.
Of all its imported crude each month from Iran 14%.
Goes into.
Italy.
Spain is dependent for a bit more than 13%.
It's sources in Brussels will confined privately that the EU doesn't know yet how they're going to compensate.
For the loss in a rainy in oil.
To those nations in the email me that are currently most small.
Let me ask Cuba because we got to wrap it up here -- to is is -- shooting at south than in the -- because we know that oil exports are basically the life but blood of this country yet it is getting.
It's -- maybe offer -- out had lions and and causing this sort of turmoil around the world.
What's going to niece -- in the ultimate fallout here.
Well the ultimate -- ought to be particularly dangerous the Iranians have pushed themselves into a corner.
What it is the west is doing here is using oil sanctions.
Not so much as a way of impeding the Iranian nuclear project which they frankly can't do.
Intelligence throughout the the western world is just about convinced if they want they will have arms within eighteen months.
What we've decided to do here is to use these sanctions to destabilize.
The current domestic political structure inside Iran.
They have significant political problems they have -- an economic situation that is collapsing.
That is there Achilles tendon are Ryan cannot sustain.
This embargo by 1 July if Europe actually does it.
24%.
Of their exports per month -- go to Europe and they simply can't replace that huge market in that short of.
Can't and a time can't Mars indicate university thank you so much for being with us destabilizing.
I think that is -- that the word of the day really.
In terms of what energy prices crude oil prices could do to not just Iran and and -- -- back to even our nation's economy.
Thanks very much for being -- us today.
