Jersey gas hasn’t been this cheap since 2004. AAA reports at an average $2.18 a gallon and falling. The Labor Day weekend gas prices could be a full dollar less than a year ago. Ever since the global gas crisis of the 1970’s, there’s been a ban on exporting U.S. oil overseas. A July study from the consulting firm Stancil & Co. found lifting the ban could drive up gas prices by as much as 15 cents a gallon. A competing study by the Energy Information Administration concludes the opposite. And the pressure’s on President Barack Obama to green-light sales of U.S. fuel around the world. Joining us is the dean of William Paterson University‘s College of Business Siamack Shojai. He told NJTV News Anchor Mary Alice Williams that different studies on oil and gas prices make different assumptions.
“It really depends,” Shojai said. “Different studies make different assumptions and the good thing is that they’re already explicit about it, they don’t hide it. So depending on what assumption is going to actually happen or occur, one way or another they could be right. And you know economists usually say on one hand this is going to happen and on the other hand that may happen and you can’t find an economist with only one hand.”
In the United States, an unprecedented amount of oil production has occurred. When asked how it has effected the global markets, Shojai said that oil productions have reduced the number of imports that the U.S. receives. Shojai said that the U.S. has been exporting about half a million barrels a day. He also said that within the last few years there has been a lot of crude oil globally.
“Saudi Arabia is pumping tons of oil and Russia is doing the same thing and the industrial growth in China is going down and people are worried about the demand side, so there has been tons of oil out there,” Shojai said.
Shojai said the domestic gas prices in the U.S. depend on additional exports of crude oil by the U.S. and that it is offset by cutting production by other producers outside the U.S.
On what other significant factors cause fluctuations in oil prices, Shojai said that supply and demand plays a factor. He also said that the market is very nervous with all the news about China and the stock market.
“So the market is very volatile and they are responding and kind of reacting maybe to every little piece of news which comes,” said Shojai. “So you see that in one day oil price goes up by $4 and then it comes down by $3. That volatility shows that nobody is really certain about the future of economic growth, globally. The future of monetary policy and interest rates in the United States and also the volatility in the stock market is adding to all the uncertainty about oil prices.”
As the U.S. and other places around the world move away from fossil fuels and towards renewable energy, Shojai said that it will take a long time before there is a significant difference in the price of oil and before the market moves on from fossil fuel.
“The cost of producing electricity has come down drastically, but still more than 40 percent of all oil produced, crude oil produced is used in transportation and we don’t see electric cars and other sources of fuels for transportation. It would take a long time before we get there,” Shojai said.