Whether you own a home or drive a vehicle, consumers will likely notice the high gas prices afflicting much of the globe. American motorists are paying more than $3 per gallon, while Canadians are doling out an average $1.30 per litre of gas. This can be attributed to international oil prices hanging around $100 per barrel.
T. Boone Pickens, well-known oil and gas entrepreneur, told CNBC international oil prices will remain above the $100 market in perpetuity because it simply “is not a free market.” In other words, despite the slight drop in oil prices, it won’t remain that way for very long.
Citing his recent speech at the Investools 4th Annual Investor Education Conference in Dallas, the Organization of the Petroleum Exporting Countries (OPEC) biggest producer, Saudi Arabia, reminded all members that oil prices need to stay high in order to maintain social spending. This will cause OPEC to reduce production whenever it pleases so it can keep prices high and government coffers loaded.
“Oil is not a free market. OPEC sets the price of oil,” Pickens told the business news network. “They can set the price because they produce 30 million barrels a day out of 92 million for the world…those 30 million barrels can be the swing factor.”
Although Pickens expects oil prices to eventually remain higher than $100 for a long period of time, he was surprised that crude prices declined considering that violence has engulfed the Middle East. Pickens argued that investors were initially concerned about war and its effects on oil, but now they realize that this is what is going to transpire for a while so it’s fine as long as oil production isn’t hurt.
In the immediate future, the U.S. could rely less on foreign oil and more on North American resources, says Pickens. In recent years, the U.S. has started to depend more on its own supply because of the technological advancements and domestic companies finding new ways to produce oil.
“We went to the Middle East because we thought that was where we were going to get oil, and it was a good decision…but what no one saw in the future was horizontal drilling. And there, you doubled your production. It was that simple,” he said.
Analysts project that the U.S. could start producing 14 million barrels a day within the next 10 years.