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Moody’s Chief Economist John Lonski and Dow Jones Columnist Al Lewis on the factors driving up the price of oil.
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-- let let's turn to what's happening here John -- they do with energy.
-- these prices are rising dramatically.
Over the last eighteen months we're looking -- crude oil prices that are prison.
About 35 dollars a gallon we're looking Avaya a futures market that is up -- 17% and open interest since the beginning of the year.
We've got speculation and froth in this market we've got oil companies that are moving product or overseas.
Because this market is one which demand is dropping.
What are our prospects for a lower energy prices.
What won't Whitney's we got first of all as we have to somehow reduce all of this uncertainty that's emanating from the situation in Iran.
And as long as that there is.
-- material risk that there could be a closure of the -- of Hormuz you're gonna be looking net upward pressure on.
Energy prices because of related speculation.
Yeah Albert analyst I've talked with -- and strategies that -- -- in the oil market.
They actually think that there is from a dollar to a dollar and a half -- just pure froth and there.
Driven by speculation driven by -- change in the market that is to global demand driving rather than domestic demand.
This market what do you think.
I would I would agree with that I would add to that zero interest rates anyone else are you gonna do.
To make money other than to buy commodities and put your money in the stock market I think that's driving.
A lot of it.
Everything that's going on and I ran right now I have to remind you it's all happened before.
Israel is even -- you know Bob some of their new plants before set aside -- everything we're talking about the uncertainty in the middle EST how this has been with us since biblical times so.
I don't see that as the key driver here although I do you know I do sympathize with doesn't say.
There's a risk and we don't -- -- -- -- future but we're never gonna not a future of the Middle East.
Well -- in of people -- also that it was just a year ago.
There we were looking at four dollar gasoline for crying out block out at the end of last staple.
Prices were at four dollars and crude oil was at a 115.
Dollars a barrel.
It it dropped to 75.
By September.
In large measure because something that isn't happening this time occur.
That is the administration started.
Jaw -- prices they Commodity Futures Trading Commission started.
Sending signals that was going to squeeze those folks on margin and that nymex.
Actually raise margin requirements why in the world -- of that happening here now.
-- that -- but we also I should remember that in response to last year's run up by the price of gasoline poured dollars per gallon by may.
The economy slowed significantly.
In that sort of slowdown in US and global economic activity helped to lower the price of gasoline.
But it would help if we had.
Action taken by the -- nymex insult want to help curtail speculation another action perhaps boost the supply about gasoline and oil.
And perhaps this administration might temporarily lose its mind and actually start.
It -- -- and folks if to to start exploiting.
And producing energy here in the United States -- they don't.
It's a possibility I think there is a lot of energy production here I mean we've got a lot going on the Bakken well what it's really doing is producing.
-- thought natural gas -- we got a lot of cheap natural gas.
Adding these oil prices are gonna take care themselves I think you can do have a recession in Europe that's gonna reduce global demand for oil.
And you know we're still gonna have expensive -- I don't I don't think 75 dollar a barrel oil.
Is in the future for any long period time I think -- it's gonna settle around a hundred and we're just gonna have to.
To get used to it but I do think that.
Those prices are going to force our oil production to increase in the United States.
-- -- -- -- last right you have to say this report give you the last word.
I disagree intensely Al worth euros on the idea that -- would remain at a high level is no excuse for it.
And and in now and any suggestion that oil is a free market in this world or in this country.
Is madness itself we've got -- we've got to focus on the reality.
I think in the fact that we're stripping out half for a -- stripping.
Half trillion dollars just for gasoline prices out of this economy every year and.
-- we can't lose sight of the fact that natural gas prices have plunged because of increased supply of natural gas -- to the development of -- shale reserves.
I'd like -- regarding the cost of crude.
The marginal cost of extracting.
A barrel of crude from the marginal fields Alberta Canada seventy dollars per barrel so there is room for loyalty to move lower the group.
Some of -- and you figure that -- every every and the gal gas.
You can -- -- million dollars that day to the cost for the American consumer.
Were up -- over a dollar and a half of September of 2010.
That works out to six just about 600.
Billion.
Dollars and we got fools running around Washington DC talking about a payroll tax holiday.
While they are slamming every working man.
And middle class family in the country.
And by not doing more to develop reserves we -- fewer jobs and otherwise and let's not forget with cheaper energy we'll have more jobs in manufacturing.
And let's see prosperity might return now what -- affect.
I think prosperity will return Lou in about 2018.
That's where I'm I'm seeing it come back right now I think we're in a long.
Slot no matter who's president.
-- matter whether the Republicans and Democrats are common Schatz -- -- debt crisis here that's it you know recession.
Else.
