>> MARIA: WELCOME BACK.
CRUDE OIL CONTINUES RISING UP
ANOTHER QUARTER OF A PERCENT
THIS MORNING.
U.S. OIL FUTURES TRADING ABOVE
$72 A BARREL NOW.
HITTING THE HIGHEST LEVEL IN
THREE AND-A-HALF YEARS.
INVESTORS FEAR THE U.S. COULD
IMPOSE NEW SANCTIONS ON KEY OIL
EXPORTER VENEZUELA, FOLLOWING
THE ELECTION SUNDAY THAT MIKE
PENCE CALLED A SHAM.
JOINING US RIGHT NOW IS STEVEN
SHORE.
THANK YOU FOR JOINING US.
YOUR THOUGHTS ON THE -- IF WE
WERE TO SEE NEW SANCTIONS
AGAINST VENEZUELA, YOUR THOUGHTS
ON HOW HIGH OIL COULD GO?
>> OIL COULD CERTAINLY GO
UPWARDS OF -- WE KNOW THE
ECONOMY CAN AFFORD OIL AT
ANOTHER $8 A BARREL HIGHER.
SO PUSHING WTI CLOSE TO $80 A
BARREL.
I'M SKEPTICAL WE'LL SEE THAT BUT
IT IS A POSSIBILITY.
CERTAINLY IF THIS ADMINISTRATION
TAKES THE STEP OF BANNING THE
OIL TRADE WITH VENEZUELA, THIS
WOULD PUT FIVE COMPANIES HERE IN
THE UNITED STATES IN A VERY
INTERESTING POSITION.
OF COURSE, WE HAVE CITGO WHICH
IS OWNED BY THE STATE OF
VENEZUELA.
WE HAVE PVF, CHEVRON,
CONOCOPHILLIPS AND VALERO WHICH
IN TOTAL IMPORT ABOUT
785 MILLION BARRELS OF OIL --
EXCUSE ME 785,000 BARRELS A DAY
OF OIL FROM VENEZUELA.
THIS CERTAINLY IS SUPPORTIVE OF
PRICE.
I WANT TO KEEP IN MIND THAT THE
OIL THAT WE DO IMPORT FROM
VENEZUELA IS A HEAVY SOUR OIL.
THAT HAS NO RELATION TO THE KNEE
MENTION CONTRACT WHICH IS --
NYMEX TEXAS, SO IT'S A DIFFERENT
TYPE OF OIL.
THIS WOULD HAVE NO IMPACT ON THE
SUPPLY DELIVERY MECHANISM OF THE
UNDERLYING FUTURES CONTRACT BUT
CERTAINLY FROM A POLITICAL
PERSPECTIVE, IT CERTAINLY IS
SUPPORTIVE OF PRICE.
>> MARIA: JOHN?
>> I WANT TO ASK YOU ABOUT A GAP
THAT'S SHOWING UP IN OIL PRICES
RIGHT NOW.
WE SEE BRENT PRICES QUOTED CLOSE
TO $80 MORE THESE DAYS.
WEST TEXAS IS IN THE LOW 70s.
WHY IS THERE SUCH A BIG GAP IN
U.S. OIL PRICES AND
INTERNATIONALLY TRADED PRICES
LIKE BRENT RIGHT NOW?
>> HERE IN THE UNITED STATES WE
HAVE TOO MUCH OIL AND WE DON'T
HAVE THE CAPACITY TO GET IT
WHERE IT NEEDS TO BE IN THE
EAGLE FORD AND PERMIAN BASIN IN
WEST TEXAS, WHEN WE LOOK AT THE
PRICE DIFFERENTIALS TO THE PRICE
IN OKLAHOMA OR THE PRICE IN
HOUSTON AND THE EXPORT MARKET
FOR OIL, THOSE PRICE
DIFFERENTIALS WITH WEST TEXAS
OIL TRADING AT A STEEP DISCOUNT,
LAST WEEK $12 BELOW THE PRICE OF
W TI, THIS IS BECAUSE WE DON'T
HAVE ENOUGH PIPELINE.
WE ARE PRODUCING A LOT OF OIL.
WE CAN'T GET THE OIL WHERE IT
NEEDS TO BE.
THIS IS KEEPING THE PRICE OF WTI
RELATIVELY LOWER AS OPPOSED TO
BRENT.
KEEP IN MIND, WE WERE ALL
TALKING ABOUT THE HIGH QUOTE,
UNQUOTE OIL PRICES BUT DEMAND
FOR GASOLINE HAS NEVER BEEN
STRONGER AND AT THIS TIME OF THE
YEAR DEMAND FOR CRUDE OIL HAS
NEVER BEEN STRONGER.
THE BRENT MARKET WHICH IS MORE
OF A FACTOR BASED ON GEO
POLITICS, WHAT'S GOING ON IN THE
MIDDLE EAST, IS REFLECTIVE.
IT'S THE GLUT OF OIL IN THE
UNITED STATES, IT'S THE
GEOPOLITICAL RISK OUTSIDE OF THE
UNITED STATES, HENCE WHY THAT
GAP IS WIDE AND WHY IT IS
GROWING.
>> BACK TO THE ORIGINAL COMMENTS
TO MARIA ABOUT WHAT THE ECONOMY
CAN -- TO USE YOUR WORDS,
STEVEN, HANDLE, SO 72 FOR WEST
TEXAS CRUDE, SO IT'S 80, CAN YOU
EXPAND ON THAT A LITTLE ABOUT
WHERE IT BECOMES A PROBLEM FOR
THE ECONOMY?
>> SURE.
$80-BARREL, SO ABOUT $8 HIGHER
IS GOING TO TRANSLATE TO ABOUT
ANOTHER 16 TO 20-CENTS A GALLON
AT THE PUMP.
THAT WILL GET THE NATIONAL
AVERAGE UP TO ABOUT THE
MID-3s, SO $4 UP THERE IN NEW
YORK, $4 IN PHILADELPHIA, MAYBE
$3.25 DOWN IN BIRMINGHAM,
ALABAMA.
BUT WHAT WE KNOW IN THE PAST,
THAT THE CONSUMER BEGINS TO
REALLY ALTER THEIR BEHAVIOR WHEN
THE PRICE APPROACHES $3.50,
$3.60.
>>>
$3>
THAT'S WHEN DEMAND FALLSES OFF.
ANYTHING IN BETWEEN HERE AND
UPWARDS, THE ECONOMY IN THE PAST
HAS DEMONSTRATED ITS ABILITY TO
ABSORB THESE PRICES.
I WOULD SAY THERE'S ANOTHER $8.
NOW, OF COURSE THE BIG
DIFFERENCE BETWEEN NOW AND 10
YEARS AGO WHEN WE LAST SAW THESE
PRICES AT THE PUMP WAS WE'RE
DRIVING A LOT MORE HYBRIDS ON
THE ROAD, A LOT MORE ELECTRIC
VEHICLES, AND SO FORTH.
SO OUR DEMAND HE'LL HAS AT AT
SO OUR DEMAND HE EL HAS AT AT
SO OUR DEMAND HE ELAHAS AT AT
SO OUR DEMAND HE ELASTS AT AT
SO OUR DEMAND HE ELASTICAT AT
SO OUR DEMAND HE ELASTICIT AT
SO OUR DEMAND HE ELASTICITIET
SO OUR DEMAND HE ELASTICITIES HV
SO OUR DEMAND HE ELASTICITIES HE
CHANGED.
IF WE GET TO $80, THE ECONOMY IS
GOING TO APPROACH THE DANGER
ZONE.
>> MARIA: ALL RIGHT.
WE WILL LEAVE IT THERE.
STEVEN, GOOD TO SEE YOU.