Higher oil, energy prices 'here to stay,' analyst says

The Schork Group principal Stephen Schork explained the "new normal" for oil prices on Tuesday, as West Texas Intermediate crude hit a seven-year high the day before. 

Schork told "Varney & Co." on Tuesday that he believes higher oil and energy prices overall "are here to stay." 

On Monday, West Texas Intermediate crude soared $1.17 to $80.52 a barrel. The energy component early on Monday briefly topped $82, hitting a seven-year high. On Tuesday, WTI crude oil climbed 28 cents to $80.80 a barrel. 

Brent crude fell four cents to $83.61 a barrel on Tuesday morning, after earlier hitting a high of $84.23 a barrel. On Monday, the global oil benchmark, reached $84.60, its highest since October 2018.

Late last month, Goldman Sachs Group Inc. raised its forecast for global crude oil prices to reach $90 per barrel by the end of this year, up from $80, due to supply disruptions in the Gulf of Mexico and signs of strengthening demand.

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In June, Bank of America forecasted that Brent crude oil could top $100 a barrel next year as the world emerges from the COVID-19 pandemic. 

Pent-up demand following 18 months of lockdowns, a continued preference of private car usage over mass transit and remote work potentially leading to more miles driven will keep demand strong. 

At the same time, supplies will be limited by government pressure to curb capex Paris climate agreement goals, assuage demands for environmental, social, and governance investing and pressure to lower carbon emissions. 

On Tuesday, Schork pointed to the forecasts that oil could reach $90 or $100 a barrel and said, he "will not argue against it." 

"But what tends to happen is you’ve invited a lot of speculation," he continued. 

Schork then explained that energy prices are contingent on what happens during the winter. 

He said that if Europe and North America will experience a cold winter, oil, gas and energy prices "are all going to move higher."

"If we don’t, we will see a regression," he continued, before stressing that "we are in a new normal where higher oil prices, higher energy prices are here to stay." 

He then argued that the environmental, social and governance (ESG) agenda is "taking resiliency out of the market." 

"We don’t have coal. We don’t have gas to fall back on so, therefore, we’re looking at greater volatility and higher prices for the foreseeable future," Schork added. 

Schork told host Stuart Varney on Tuesday that the "energy crisis" was "created in part by government policy jumping the gun on renewables too quickly this summer." 

Schork noted that over the summer the European Union was trying to encourage European consumers, including utilities and heavy industry, "to get out of coal and move over to renewables." 

The European Union’s goal is to be climate-neutral by 2050, according to the European Commission, which pointed to the EU’s goal for an economy with net-zero greenhouse gas emissions. 

"What actually happened, was yes, they succeeded in pushing the industry out of coal and pushed them right into natural gas," Schork said. 

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He then explained that because the demand for natural gas had increased while supply cannot meet the extra demand in Europe, the price for natural gas skyrocketed. He stressed that the big push to go into oil derivatives for power generation was part of the reason.

He also pointed to Hurricane Ida, which knocked out a lot of crude oil production in the United States in August. 

"Right now demand has rebounded much stronger than anyone expected and yet U.S. crude oil producers are still producing two million barrels fewer today than they were pre-Covid," Schork noted. 

He stressed that rising demand at a time when "the market is not reacting on the supply side," as well as the government intervention amid a push for green energy have caused prices to rally. 

Gas prices have jumped across the nation, leaving only six states with prices under $3 per gallon as of Tuesday.

The national average stood at $3.28 on Tuesday, slightly higher from the day before and $1.09 more than the same time last year, according to AAA. 

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The association noted in a news release that this week, gas prices reached the highest since October 2014 "and is primarily due to the surging price of crude oil." 

"The key driver for this recent rise in the price of gas is crude oil, which typically accounts for between 50% and 60% of the price at the pump," Andrew Gross, a AAA spokesperson, said. "And last week’s decision by OPEC and its oil-producing allies to not increase production further only exacerbated the upward momentum for crude oil prices."

AAA pointed to new data from the U.S. Energy Information Administration, which revealed demand for gas increased slightly, contributing to the national average’s rise in prices. 

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FOX Business’ Jonathan Garber contributed to this report.