Oil prices continue to rally after OPEC and non-OPEC countries finally agreed to production cuts. But key factors could keep rising oil prices at bay. The Schork Report Editor Stephen Schork weighed in on the outlook for oil and gas prices.
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Despite the agreement to cut production, Schork was skeptical many countries would comply.
“At this point, we’re going on a lot of assumptions here, Maria. We are assuming 100% compliance on the part of these announced cuts, that’s never happened before,” Schork told the FOX Business Network’s Maria Bartiromo.
He expects a near-term decline in demand in reaction to the higher prices.
“Of course we’re going to see a demand response, because with the introduction of substitutes, Elon Musk [and Tesla], the price elasticity of demand has completely changed at this point. So, as oil and as gasoline prices increase this summer, demand will begin to suffer on these rising prices,” he said.
Alternatives to oil in the transportation industry would continue to curb demand in the long-term, Schork predicted.
“It’s not just the electric motors, not just the hybrid motors, it’s also things like driverless technology which is certainly going to continue to eat into the demand. So, once you begin to see oil prices will get up into that $60, maybe if it does go over $60, this from a long-term standpoint does not play well into the hand of these oil-producing countries,” he said.