Oil prices are increasing since OPEC reached an agreement on its first oil production cut since 2008, but will the rally continue? Former Shell Oil President John Hofmeister weighed in on whether the deal will even hold up across the oil producing nations.
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“Well I think it’s still a big question mark whether it holds and I think the faster the oil price rises the less the chances that it will hold because there are a lot of folks out there, OPEC as well as other producers that are really short of cash and have lived with such difficulty in the last few years that they’ll do anything they can to raise production in the short term in order to capture some of that available money with higher oil price,” Hofmeister told the FOX Business Network’s Neil Cavuto.
But, according to Hofmeister, even if President-elect Donald Trump makes it a priority to deregulate the U.S. oil industry, consumers should not expect an immediate decline in oil prices.
“Well I don’t think we’re going to see any kind of immediate return to prosperity or to rapid production increase and that’s because the money’s not there and the banks are still reluctant to loan to oil and gas producers from , you know, the past.
Hofmeister detailed other factors that would slow an increase in U.S. oil production.
“And we also have a supply chain that’s broken. And we are short on people. And so the combination means it’s going to be a year, year and a half, to kind of gear up the system.”
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But Hofmeister said despite all of these obstacles, any help the incoming administration could provide is still welcome.
“Any relief that the new administration can provide from the burden that the previous administration, or the current administration, put on the industry would be welcome.”
Hofmeister predicted there would be an increasing activism in response to any potential deregulation efforts in of oil industry by the Trump administration.
“But what also might happen is that in response to any relaxation, we’re going to see a lot of activism like we’re seeing in North Dakota right now,” Hofmeister continued, “The absurdity of course is these people don’t mind raising the price of the product to the American people, which will dent the otherwise good economic growth of the American economy.”