TOM HUDSON: Tensions with Iran have pushed prices at the pump here in the
U.S. up to an average $3.77 a gallon nationwide according to AAA in the
latest data. Rising fuel prices could threaten a fledgling U.S. economy
and the economic recovery we’ve been seeing, it’s shaping up to be a huge
issue in this year’s presidential election.It’s all the talk in Houston this week where global energy leaders are in town for a summit on energy security.Our Diane Eastabrook is there as well — Diane.
DIANE EASTABROOK, NIGHTLY BUSINESS REPORT CORRESPONDENT: Tom, Houston is the epicenter of big oil here in the U.S. This is a city that likes high oil prices but not too high, obviously, because high pump prices can strangle the U.S. consumer.
This afternoon, I spoke with Guy Caruso, who is a senior advisor for
the Center of Strategic and International Studies. And I began by asking
him if he thinks high oil prices will be a key talking point in this fall’s
GUY CARUSO, SR. ADVISER, CTR. STRATEGIC & INTL. STUDIES: I think
energy prices definitely are going to be an issue in this election, mainly
because of the relatively slow recovery and continuing high unemployment.
There will be a linkage between energy prices and the economy. And both
sides will try to either blame or take credit for anything that’s
EASTABROOK: What do you think the potential is of us seeing $100 a
barrel oil through the summer and possibly even into the fall?
CARUSO: Well, I think prices will stay very firm. And what could
change that would be any developments in Iran that could disrupt oil
supplies. That would send prices higher. It’s hard to say without knowing
the exact scenario. but certainly $10 or $20 per barrel higher prices could
happen in a moderate disruption scenario.
EASTABROOK: So how important is it that the government approves the
CARUSO: I think that’s definitely part of the medium term solution,
three to five years, because even if it were approved tomorrow, it would be
2016 before the first oil would flow. So it’s part of the solution but
it’s medium term.
And I think that’s one of the things about energy is most things take
time. New production, efficiency standards — those are five to 10 or even
longer time frames.
EASTABROOK: Permits to drill in the Gulf of Mexico since the
moratorium to drill there was lifted have been rather flat since they were
before the BP accident. Are the government rules to drill too onerous for
CARUSO: It’s definitely slower now, because of the additional rules
and regulations, and oversight that’s been put in place by the new
organization within the Department of Interior. So whether it’s onerous or
not, I guess that depends on, you know, your perspective. It’s much more
stringent now and it is slowing permits down. However, most companies are willing to do what they can, of course, to meet those rules and get — so it will take a bit longer. But it’s
necessary in my view.
EASTABROOK: So, it kind of sounds like, in the short term, we could
see a lot of volatility with oil prices.
CARUSO: We’re in for a period of volatility in the short to medium
term. And by that I mean the next 18 months to five years, because the
market is so tight with respect to unused capacity, any relatively small
event, even a natural disaster tends to put upward pressure on price.
EASTABROOK: Tomorrow, I’ll be talking to the executives from
alternative fuel companies about how that industry is changing and becoming