As the US Senate moved toward its Mar. 29 vote on legislation that would have raised the nation's five largest oil companies' federal taxes, four experts reminded the Energy and Natural Resources Committee that forces driving global oil markets are still beyond Congress's control.
Howard K. Gruenspecht, acting administrator at the US Energy Information Administration, said EIA expected oil costs to remain the major influence on gasoline and diesel fuel prices through the end of 2013.
Significant uncertainties could push crude prices higher or lower than expected, Gruenspecht continued. He said a number of producers outside the Organization of Petroleum Exporting Countries are currently undergoing supply disruptions.
"Oil prices could be higher than projected if current disruptions intensify, new non‐OPEC projects come online more slowly than expected, or OPEC members do not increase production," Gruenspecht added. "On the demand side, if the pace of global economic growth fails to recover in [Organization for Economic Cooperation and Development] countries, or if economic growth slows in non‐OECD countries, prices could be lower."
Daniel Yergin, chairman of IHS Cambridge Energy Research Associates, suggested that geopolitics—specifically rising tension over Iran—have become the dominant factor in pushing world oil prices higher. "It is the prospect of Iranian barrels dropping out of a relatively tight market—and not being replaced—that is affecting crude oil prices," he said.
Saudi Arabia, with almost all of the world's spare capacity, would be able to fill a 2 million b/d supply gap in supply, but this could alarm the market, he testified. Additional supplies could come from Iraq, Libya, Angola, Colombia, Canada, and the US over the next year, but they could not be called on immediately in a major supply disruption, Yergin said.
Market's psychology
Frank A. Verrastro, director of the Energy and National Security Program at the Center for Strategic and International Studies, noted that, at least in the near term, the global oil market's psychology supports keeping prices elevated.
"One glimmer of hope is that if the Iranian confrontation can be peacefully diffused, we could find ourselves with (at least temporarily) an oversupply in the market—possibly, enough to temper the current bullish sentiment before doing economic damage," he said.
Paul Horsnell, who leads commodities research at Barclays Capital London, said closing refineries with high gasoline yields on the US East Coast and in the Caribbean means that most of the US Northeast's gasoline needs will be met by imports or more shipments from the Gulf Coast.
Market price dynamics could provide incentives for imports to meet any potential gaps in the next 3 months, he indicated.
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