Stephen Schork, principal at the Schork Group, joins Yahoo Finance Live to discuss the latest in gas prices and oil markets and recent comments by Secretary Buttigieg about tapping strategic petroleum reserves to address the problem.

Video Transcript

RACHELLE AKUFFO: Welcome back. Another record for gas prices with the national average hitting $4.85 a gallon. Our next guest says, we haven't seen anything yet. So let's brace ourselves as we bring in our guest, Stephen Schork, the Schork Group principal. Stephen, thank you for joining us. So, obviously, a little bit nerve wracking here. So what are the expectations, then, in terms of what we can expect for the summer?

STEPHEN SCHORK: Yeah, absolutely. We're just now getting into the peak demand season, and it's already gotten off to a very strong start. With crude oil prices hovering right around $120 a barrel right now, should these prices remain? And I suspect they will through the end of the month. That does translate now into a national average of well over $5 a gallon. In fact, $122, $125 correlates to a national average of $5.40 at the pump as we head off to our 4th of July picnics.

DAVE BRIGGS: On Sunday, it was interesting. Pete Buttigieg, the Transportation Secretary, was on ABC, pressed about gas prices. He said the Strategic Petroleum Reserve release did actually stabilize prices. And then he was pressed on if the president-- any president-- really has an impact on the price at the pump. Here's what he said.

PETE BUTTIGIEG: But we also know that the price of gasoline is not set by a dial in the Oval Office. And when an oil company is deciding, hour by hour, how much to charge you for a gallon of gas, they're not calling the administration to ask what they should do. They're doing it based on their goal of maximizing their profits.

DAVE BRIGGS: Stephen, one, did the strategic release have any impact on the market? And two, does any president truly impact the price of gas?

STEPHEN SCHORK: Well, I don't know what color the sky in the world of [INAUDIBLE] world is. But in the real world, absolutely. The SPR had an effect on prices. When we released the barrels, the first batch in November, oil prices were $70 a barrel. Today, they're $120 a barrel. It was a absolute sign of desperation that this administration has no plan. Yes, I'm sorry, energy policy matters. The White House's rhetoric matters.

Capital goes where it is welcome, stays where it is well treated. This administration has made it very clear, even before they won election, that they are going to be-- and they fulfilled this-- the most hostile White House towards the oil and gas industry. Therefore, we're looking at an industry that underinvested in fossil fuels during COVID, as prices crashed, as big oil lost $66 billion in 2020.

That investment has not come back. In fact, we've seen policy, we've seen the shift in both Wall Street and in the White House, to move barrels, to move investment towards decarbonization, away from fossil fuels. So, quite frankly, the money's not going in. And this is policy set by this administration. And then when you set the signals that we are, what, trying to release barrels from the SPR, we clearly don't know what we're doing here.

The Secretary of Energy doesn't even know how much oil the United States consumes on a daily basis. When she was asked in November what her plan was to increase US crude oil production, she laughed at the interviewer. So now we have a situation where we are waiving the ethanol requirements, and we're going to allow more ethanol to go into the gasoline blend.

Guys, this sets the stage for even higher oil-- excuse me, higher food costs, because right now, the corn industry, their production, 40% of it goes into ethanol. Now we're increasing the demand for ethanol of corn, which is going to now be greater than 40%, because fertilizer prices have doubled over the last year, thanks to the war on natural gas. We're planting less corn going into the ground today.

So when we take this corn out of the ground in the fall, we're not going to have the same amount of quantity as we did a year ago. And we've artificially increased the demand for corn from the energy industry. So therefore, we're looking at runaway inflation that is going to last through this summer, going into the fall, not only for energy, but also for food costs.

SEANA SMITH: Well, Stephen, you said runaway inflation. I guess two-part question here. One, how bad could it potentially get? And then for possible solutions that could be on the table, we know Congress is considering possibly pausing the gas tax. Is this something that the Biden administration should act on right now?

STEPHEN SCHORK: Yeah, a big deal. You're taking $0.18 of the federal tax. And you've got a national average that's going to go to $5.40. Do you really think taking $0.18-- and I'm not attacking you, but this administration. Do you really think taking $0.18 and taking oil prices-- gasoline prices from $5.40 to $5.20 is really going to make a difference?

Hey, if you really want to try and make a difference, how about we waive the Jones Act? That is to say we waive the requirement that all interstate commerce, water borne, on a barge, on a vessel, has to be on an American flag vessel. Why don't we waive that action, allow foreign flag vessels to carry gasoline that's being manufactured in the Gulf of Mexico and the Houston refinery epicenter, put those on American flag vessels-- excuse me-- foreign flag vessels, and allow that gasoline to be rerouted over into the East Coast?

So, pulling back and playing games with the tax is dumb. It's a silly move. It does not address the long-term structural imbalance in this market, where you have a balance where refinery capacity here in the East Coast, which is what drives the [INAUDIBLE] futures price, refinery capacity has been slashed over the last 10 years by 55%. So, quite frankly, we don't have the refinery capacity here on the East Coast to make gasoline, hence why we are looking at very low supplies.

And now we have a Commerce Act that does not allow or limits the amount of gasoline to be shipped from Houston into the East Coast. So we are barking up all the wrong treaties, playing gimmicks with tax schemes, where we're not-- where we could be absolutely passing legislation or wavering the ability for the market to easily transport gasoline from where it's being manufactured to where it's being consumed.

RACHELLE AKUFFO: I want to bring in OPEC and OPEC+. Obviously, they agreed to increase production. But they're also dealing with some of these sanctions on Russia. What sort of impact do you think they can have? And what sort of economic impact do you think these sustained high oil and gas prices will have on the economy?

STEPHEN SCHORK: Yeah, the OPEC, it's a-- I mean, there are-- or any oil producer. It's a very fine line because you drive oil prices high enough, you sow the seeds for a recession. And if we are not in a recession now, we are going to be in recession by the end of the year. That is, I mean, virtually, a fact. Every single recession, starting with the Arab oil embargo in '74 up through the Great Recession, every single recession has been preceded by a precipitous rise in both energy and food costs. The current spikes we're seeing in those two commodities, we've never experienced before. So a recession at this point is unavoidable.

So now if you're OPEC, if you are Texas, if you are Russia, what do you do? Do you increase production now, where the likelihood of a severe economic downturn is clearly right around the corner? So the answer is, you're going to hold your cards tight. Or you're going to make incremental increases to production to get supply to the market under the understanding that probably within 6 to 12 months, you're going to see a significant pullback in demand because the United States and nearby, the globe, will be in recession.