HOUSTON – Many Houston area residents are having to make adjustments to their personal budgets to accommodate a rise in gas prices, and energy industry analysts expect the higher prices to linger.
“Overall, the supply situation is relatively bleak, and so, I think we can expect higher price levels for a considerable period of time,” said University of Houston finance professor, Craig Pirrong. “The reason prices are so volatile is because there is no slack system. With the loss of Russian production, everybody else is maxed out in terms of what they can produce.”
The U.S. Energy Information Administration’s short-term energy outlook “is subject to heightened levels of uncertainty resulting from a variety of factors, including Russia’s further invasion of Ukraine.” The EIA also reported, “Supply uncertainty results from the conflict in Ukraine, the production decisions of OPEC+, and the rate at which U.S. oil and natural gas producers increase drilling.”
“It’s going to be a roller coaster. The market is on a knife’s edge,” said Pirrong.
Pirrong adds the US can ramp up production, but it takes time.
“Two months for a price shock like this to translate into drilling activity, and then another one several months after that for wells that are drilled to come online and produce,” said Pirrong.