Oil prices will moderate before heading to ‘at least $120 a barrel’: The Energy Word Founder

Dan Dicker, "Turning Oil Green" Author and The Energy Word Founder, joins Yahoo Finance Live to discuss price forecasts for crude oil, geopolitical pressures from Russia-Ukraine impacting global energy markets, and comments on President Biden's remarks on rising gas prices.

Video Transcript

- Welcome back to Yahoo Finance Live, everyone. We had WTI crude hit $100 earlier in the day's activity. We've moved off of that level. Brent crude, that also was higher earlier, but right now sitting at about $98.43 still holding onto gains and move higher of about 1.6%. And then still holding onto fractional move higher for WTI. You're seeing that at about 4/10 of a percent higher here on the day. And then additionally, taking a look at RBOB gasoline futures, you're seeing that flat but to the upside. Well, actually it's up by about 1.2%. And you have to excuse me. I was looking at the cents basis there.

But it is up over the past five days as well. Cause for alarm there up by about 3% over that period of time. We'll continue to track this of course moving forward given the international conflict between Russia and Ukraine and all of the impacts more so internationally with some of the dependence on those supplies as well.

EMILY MCCORMICK: With Brent crude oil soaring above $100 per barrel for the first time since 2014 earlier, and WTI trailing close behind, President Joe Biden said he wants to minimize the impact of sanctions on Russia on the US economy. Our next guest joins us for the outlook on energy markets. Dan Dicker is author of "Turning Oil Green" and founder of The Energy Word. Dan, a volatile day in energy markets. What do you think are the biggest unknowns right now that energy markets are grappling with with respect to this geopolitical conflict?

DAN DICKER: Wow, that's a really good question. I mean, I think it's the same as what everybody is sort of grappling with is, is how far will Putin go? As of today, I mean, you can see that that oil is not really reacting all that much considering that we've had a major incursion into Europe for the first time since World War II. And that would tend to make me think that the markets don't think he's going much further. So I guess that's the major question that remains unanswered.

For the most part, what I've seen today is quite a lot of sang-froid considering the level of destruction that's about to occur in Ukraine.

EMILY MCCORMICK: And we did see WTI as well as Brent crude oil prices come off of their highs of the session. But do you think the risks are still skewed to the upside? And how much higher, if so, do you think crude oil prices could jump in the near term?

DAN DICKER: Yeah, Emily. And I've been saying this here when I come onto the show for a while now that the market status for oil has been bullish for 14 months. All right? And the Ukraine has added fuel to this fire, of course. But for the most part, oil was headed above $100 anyway. And so to see this come into the marketplace, then have all of a sudden, all the media kind of jump in and says, well, oil's $100 a barrel because Putin's going into Ukraine, I don't really see it that way. And I don't think many other oil analysts would see it that way right now.

So in fact, what I see right now is a market that's probably beyond itself, is making maybe a little too much out of this geopolitical dustup right now. And oil might be likely to actually sink from here a little bit. Now over the medium and long term, I'm going to tell you what I've told you for the past 14 months, that oil is headed for at least $120 a barrel, and possibly on its way to break the old 2007 highs of $150 a barrel. But for right now, there is what there always is when these geopolitical activities start into the oil markets. They start with a reaction to the upside, and then as the sellers sort of filter back into a marketplace, it tends to moderate at least first.

So that's really what I'm looking for right now.

EMILY MCCORMICK: And when we think about that prediction, oil potentially going to $120 per barrel, earlier last night, Goldman Sachs economists were out with a note saying that every $10 increase per barrel in the price of oil lowers GDP by just under 0.1 percentage points. Are you concerned about the economy's ability to absorb the impact of potentially higher oil prices here?

DAN DICKER: I've been in the oil market for 35 years. And I've heard of the destruction of-- the economic destruction that comes with high oil prices. And yet, we've seen cyclings since 2003 for example up to $147 in 2010, up to $110 2016, 2018, somewhere close to $80, now we're close to $100. I just haven't seen that destructiveness. Oil is about the most inflexible commodity in the world. In other words, there's a certain amount that's needed. It's going to be used. And in a lot of ways, high oil prices benefit certain parts of the economy as much as it destroys other parts of the economy.

At least historically speaking, it seems to be pretty much a wash. I think it might be a little more-- clearly, it's a lot more destructive to consumers. And but in some cases for example, and the oil sector in this economy and in our country, it's obviously it pushes for very good jobs and a lot of profitability in sectors that have had a bad time over the course of the last six, seven years.

EMILY MCCORMICK: When we think about that impact to the consumer, President Biden has spoken multiple times this week about wanting to limit the price increases that Americans see at the gas pump. But how much of a price increase do you think the administration might be willing to accept given the current geopolitical situation and fallout that may just be difficult to avoid in energy markets as a result of this?

DAN DICKER: Emily, I think the question is not how much the administration is willing to take, but how much any administration can really do to affect oil prices in the marketplace. I mean, they have very few tools. Politicians realize whether they're republican or democrat high gas prices or a political nightmare. And they will do what they can to get them down. But again, historically, there's really not a lot of tools that they have. They have the strategic reserve which has a really minuscule ultimate impact on energy prices. And regulatory moves don't really have a lot of effect on it.

This is really a global kind of an affair. These markets do not move very much compared to what governments would like to see them do. And I've seen this over the course of decades from whether they're republicans or democrats. Nobody likes high gas prices. They're a political nightmare. And of course, Biden will tell you that he's going to do everything he can to lower gas prices. But I don't see that he has many tools at his disposal.

EMILY MCCORMICK: And when we think about the potential monetary policy, the inflation impact of all of this, can the Federal Reserve do anything about inflation that may be driven increasingly by higher energy prices, especially if prices continue to climb from here? Because they can impact demand to a certain degree. But the supply side seems like it would remain mostly out of their reach.

DAN DICKER: Correct. I think you've hit that right on the head. And of course, obviously, you can cool some inflation with rate hikes. You can do it. And they're clearly loath to do it. But that's one way to sort of cool some of the inflationary pressures on oil. Again, I think that even inflationary pressures are something that are adding fuel to this fire. But oil was always headed over $100 again. And in a lot of ways, it naturally belongs there. Houses have gone up three times in the last 15 years, the stock market's gone up 2 and 1/2 times in the last 15 years. Oil really does not deserve to be $45 a barrel anymore.

It really should be in triple digits like it was in 2008 and 2010 and for the most part before the pandemic hit in 2018.

EMILY MCCORMICK: Well, certainly seeing those triple digits, at least on the Brent crude oil side earlier today. Dan Dicker, author of "Turning Oil Green" and founder of The Energy Word, thank you so much for your time.