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Former Shell Oil Company President John Hofmeister explains the recent gyrations in gas prices nationally and what’s coming up for the summer drivin...
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These price gyrations and update is on where the prices are going from here.
Former president of Shell Oil on the author of why we hate the oil companies straight talk from an energy insider John -- Meister -- John.
Tell -- about why these prices are first of all why they're going down except for the West Coast.
Well they're they're dropping the Tom because there is a weakness that has entered -- to the economic forecast.
The outlook is dropping down to below 2% growth for the US looks like China could be off as much as 3%.
From where they expected from above 10% to perhaps even below 8% and Europe as you know as everyone knows is really unsettled.
With no idea what's gonna happen with Greece in the Euro and probably in recession.
The so so the reality is the demand.
-- boom that we felt late last year and early this year has given way too early -- -- -- falloff.
That's led also by the saudis who have been producing two million barrels a day above their normal limit.
And that they've been in the to replace Arabian oil that is now banned from many ports of call.
And and so all of this mix has come together to result in a surplus and with economic weakness in the forecast.
It could even fall a bit further.
So let -- at one point I know you were talking about five dollar gasoline and I've got to tell you on my visits out to California.
I saw five dollar gasoline so you were -- But -- not everywhere the average the average did not get up two to five if so you're saying that the oil traders are really.
Economic predictors if you will they're trying to figure out where this things going so.
It's -- my that's really the art buyers of oil the buyers of oil are the predictors it the traders are just the people that connect the sellers and the buyers they they just are doing their job it's the buyers whose sense whether the market is gonna be short.
Which raises the price or whether the market is going long which means we have more oil available and so they hold off buying.
Until they see the -- continue to drop then -- buy when they feel that the price is right for them let me ask you about those oil speculators there -- -- always talk about them and -- -- getting a lot of -- about the -- -- -- -- driving the price up driving the -- -- Is is this the oil traders if you will.
I know he said -- only -- end of the trading for the customers out there.
But essentially the people that are bite into contractors are -- How far down this -- thing gonna go -- -- predictions.
No I I don't know what the bottom might be because I -- I remain an optimist on the world economy.
There are a lot of people out there that are coming into material well being they have more money to spend.
There's -- a degree of uncertainty right now with all the deficit spending at the government level and so forth they're just does not enough leadership there's not enough.
Political leadership.
To give people particularly corporate.
CEOs.
A sense of confidence.
That the market will respond to investments that they might make and that's causing really a general slowdown when it comes back to the speculators.
I would say that any elected official.
Who blames oil price on speculators.
Is providing a scare tactic to the public.
To cover up the fact that that politician has done little or nothing on the public's behalf to create -- all policy which would give consumers a sense of confidence in the future of supply.
Which would lead to affordable prices yeah well accuse speculators.
Of an underlying government failure to lead is just a cop out.
But it is and I you're talking to the -- John but at the same time at some point.
When that when the price -- driven up to a higher and higher level.
Demand for it will drop off so is it an overall economic slowdown or did the prices just get to the point.
Where demand started being curtailed and therefore.
Down we go.
Yeah I I would still attributed to -- sense of economic unease.
And in the face of that economic unease about the future rate of growth in the economy.
They're just as a lack of demand a lack of future buying for oil on the basis that when and if things turn around the oil will be there.
Given what the saudis have done and and given the fact that.
You know the the world is just not growing at the rate at least I thought it would when I predicted the five dollar gasoline.
Now you -- in the West Coast there is a unique problem on the West Coast.
The refineries on the West Coast are operating at less than 80% efficiency not because they're being badly run.
But because there -- many of them are -- -- shutdown mode getting ready for the summer season or taking care preventive maintenance.
And because the West Coast has no available.
Finished products by pipeline from east of the Rockies.
-- really vulnerable and at the mercy of whatever the West Coast refineries produce did plenty of crude oil in the West Coast.
There's just a shortage of manufacturing capacity right now -- -- turnaround bit and they've got that designer fuel and they also it's Rick unique that the West Coast it's a lot of their fuel from foreign sources at the rest of the country does again.
Child was found -- correct yeah.
All right correct -- -- pop Meister always great to see you thank you so much author of -- why we hate the oil companies appreciate your input very very much.
Thank you Tom.
