Prosper Trading Academy CEO Scott Bauer explains some of the factors contributing to nationwide drops in gas prices and the pressures within Russia's energy market.
- Gas prices continue to tick down but still far higher than the Biden administration would like and also more than $1.50 above this point last year. With that in mind, the president travels to Saudi Arabia this week with hopes of increasing their production. Let's discuss with Scott Bauer, CEO of Prosper Trading Academy.
Scott, good to see you. The president writing an op-ed in "The Washington Post" today, in part saying, "Saudi Arabia has helped to restore unity among the six countries of the Gulf Cooperation Council, has fully supported the truce in Yemen, and is now working with my experts to help stabilize oil markets with other OPEC producers." In your opinion, is Saudi Arabia likely to help the president? How much can they actually do at this point?
SCOTT BAUER: Well, it's a nice op-ed. And in a perfect world, it would mean something in terms of what Saudi Arabia might be able to do. But it doesn't seem like there's a lot. All we keep hearing is that they're pretty much close to capacity here.
So I'm not sure that they can pledge anything else to supply. I just don't see it happening. I mean, maybe there's a plan for trickling down months-- six months from now. But for an immediate any sort of impact that we're going to see, I don't see anything happening.
- I mean, for now, though, we have seen, obviously, gas prices falling sharply over the last week. But what are your expectations as to how long this will last and how much it may perhaps go up, depending on what we see with oil prices?
SCOTT BAUER: Well, I think you have two really big factors. Number one is demand. And we have seen demand actually tick down here in the United States over the last couple of weeks. And that could be a factor, just that prices were so high. Because this is the heaviest driving season of the year.
But we're also looking at demand possibly getting hit from China from new lockdowns. So you've got that side of the demand part of it. But then you've got the concerns, the macro concerns, coming out of Russia and the threats that they are making right now and what may happen with the pipeline out there.
And so you've got almost a push and a pull here. You've got maybe the demand side that that's going to help a million, maybe two million, barrels a day. But then you've got that concern on the supply side that if Russia really comes through with that, any sort of retaliatory reduction at all, that could be up to two or three million barrels a day.
- I do want to circle back to that Nord Stream maintenance starting today. But first, how high do you think gas prices will go this summer, or have we already seen the peak?
SCOTT BAUER: I don't know if we've seen the peak. I'm not looking for oil at $160, $180 a barrel, like some are suggesting we may see. I wouldn't be surprised if we get back to where we were a few weeks ago. And I know people don't want to hear that.
But I do think that the longer we get into a situation, the more comfortable we'll get paying $5 a gallon, $5.50 a gallon. They don't like it, but if that is the state of reality. So I do think that as demand here picks back up a little bit, we could see those prices at the pump tick back up, as well.
- And obviously, as we were just saying in our last segment, the impact of the strong dollar, how much do you think that's going to affect what we see in the coming months?
SCOTT BAUER: I mean, where is the dollar going to end? And is it a function of the dollar being so strong or other currencies just being so weak and other central banks not being as proactive, or as aggressive, I should say, as the Fed here?
So I do think that-- typically, we see that as a contrary indicator but not now. And I just don't think that this massive dollar rally that we've seen, even if it continues, I don't know that it's going to impact oil prices. I really don't think so.
- You mentioned the Russian flow of gas into Germany. It stops today with maintenance on the Nord Stream pipeline. What's the impact there? And how successful has our economic war with Vladimir Putin been?
SCOTT BAUER: Well, I guess it depends how you measure that. From the 30,000 foot level, it doesn't seem like it has been very effective. Now, we don't know what is happening throughout Russia. We don't know if their economy is really shrinking. We've seen what's happened with the ruble, what happened right away, and then it gained some strength back.
So I think it's very difficult to tell. And I would be concerned that Putin would go ahead with this retaliation unless we start to pull back on some of these sanctions here. So I think that is a real threat. Again, I'm not saying we're getting to $150, $160 a barrel. I do think it is a real threat that needs to be dealt with.
- Data suggests Putin is making more from oil and gas now than he did prior to the Ukraine invention-- invasion, excuse me. Back here closer to home, I want to ask you, what is going on in the state of Texas? It's 110 degrees in Houston at the moment. And here's a quote-- warning-- from the government. "Potential reserve capacity shortage with no market solution available." How serious is this?
SCOTT BAUER: It is very serious. I mean, we know the problems that they have had with the grid down there for quite some time. And I'm certainly not making light of the situation, but it seems like, at least again, from my viewpoint, things are being held together by duct tape. So I'm not sure how they fix that and how immediate that they can get in there and do anything that's going to start helping people.
I mean, the weather outlook, like you said, is supposed to be awful for the rest of this week, maybe even going into next week. I know that Bitcoin miners have already started just pulling out or absolutely halting because of the power that they need. It's only going to get worse. And honestly, I don't know what they can do in the next few days or weeks to make sure that people are still getting the energy that they need.
- Wow, crushed by the cold a year ago and now, hammered by the heat in Texas. Thanks so much, Scott Bauer. Appreciate it. Great stuff.