COLLEGE STATION, Nov. 14, 2007 – Oil, which has been toying with the $100-a-barrel mark, is perhaps the most unpredictable commodity in the world, says a Texas A&M University economics professor who has studied oil prices for decades and has just completed a book on energy consumption and production.
John Moroney believes $100-a-barrel oil will happen sooner or later, “but to say it will happen at this time or that time, is foolish. No one can predict it because its price is directly related to other events,” he says.
For a history lesson, Moroney gives the example of 1990, when the United States invaded Kuwait during the first Gulf War. Within a 24-hour period, oil prices went up about 50 percent as the war unfolded.
“But within a few months, oil prices were back down to where they were when the war started,” he notes. “Many people believed oil would forever stay at high prices, but it didn’t. That just shows you can’t predict what will happen with oil over a long period of time.”
Moroney has just completed writing Power Struggle: World Energy in the 21st Century to be published next spring.
Moroney believes gasoline prices will continue to rise, but does not think those high prices will lead the U.S. into a recession.
But oil prices, he says, “affect all ranges of the economy, especially goods that depend on transportation. If, let’s say, all grocery produce was brought into a store by an 18-wheeler and diesel prices go up 20 percent, those prices will eventually be passed on to the consumer in one way or another.
“Gasoline prices are almost certain to go up during the next two or three months,” he adds.
“They are already well over $3 on the West Coast and it will likely go to $3.50 in Texas within a few months. There is always a bit a of a lag time between when oil goes up and when the price at the pump goes up. So gas could easily go up to $3.50 a gallon, but there is no reason to believe it will stay at the level for a long time.”
Moroney says the oil producers of the Middle East are over a barrel, so to speak, because they control a very emotional market.
“For them, oil is everything – their lives depend on our demand for oil,” he adds.
“But for them, oil is the only game in town. They have nothing else to export, so they are in a bit of a tricky position, too. Worldwide, there is a need for about 88 million barrels of oil every day, and all of the producers combined can only get 85 million barrels a day. So the demand is definitely exceeding the supply right now.
“But the one thing I can say with certainty after studying oil prices for 30 years: you can never – repeat, never – accurately predict what the price of oil will be over the long run. It has fooled too many people too many times.”