Former Shell Oil President John Hofmeister is weighing in on why he sees gas prices going up in the near future.
“People should enjoy it and have a good time and drive safely, because these prices are probably about as low as we’re going to see for quite some time to come. But that doesn’t take away from this holiday weekend, [travel] would be a marvelous thing to do. The old expression…go see the U.S.A.,” he told the FOX Business Network’s Sandra Smith.
Hofmeister explained why an expected decline in supply would drive the rise in gas prices.
“I think they go north from here. We’re getting closer and closer to equilibrium. Even the Secretary of Energy said yesterday that he sees equilibrium [by] 2017, we may beat that because the reduction in crude production in the U.S. is proceeding week, by week, by week.”
According to Hofmeister, the current rig count in the U.S. is not enough to maintain the current oil production.
“And as long as the drill count is as low as it is, there is nothing that will happen other than reduction in oil production in the U.S., so that’ s inevitable. It would take a doubling of today’s rig count, many people estimate, to just hold even. So the 400 and some odd rigs that are working will not produce enough new oil to sustain today’s production.”
Hofmeister predicted a rise in crude prices, leading to higher gas prices as well.
“I see crude prices continuing their trek northward – I think that will flow through to the gasoline price. That’s why I say enjoy it now. I think the next 30 to 60 days will probably be about the end of the surplus that we’ve been experiencing over these last few months and then we’ll see it move north.”
Hofmeister predicts the proposed 23-cent increase in the gas tax in New Jersey would not affect demand in the state.
“Probably most demand in New Jersey is inelastic because there is no public transportation system of any magnitude that could offer an alternative. And there is an awful lot of commuters that live in New Jersey. And so, as a consequence, people will simply pay. And New Jersey is also a transit state where people going from south to north on I-95, they have no choice – they’ll pay.”