Gas prices: Biden asks oil companies to pump more as fuel costs mount

Yahoo Finance’s Ines Ferre joins the Live show to discuss the state of the oil market amid reports that the global oil supply will fall behind expected demand.

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AKIKO FUJITA: Welcome back to Yahoo Finance Live. Well, higher gas prices may be here to stay. This according to a new report from the International Energy Agency. The IEA warning that global oil supply will fall short of expected demand, citing an expected demand spike from China, as that country reopens after COVID lockdowns. Plus, limited oil supply as sanctions on Russia continue to bite.

Let's bring in Yahoo Finance's Ines Ferre, who's tracking the oil markets for us today. And Ines, of course, we also got that big news this morning with the president sending a letter to the largest oil companies, saying, essentially, pump more, or I will invoke my emergency powers.

INES FERRE: Yeah, that's right, and talking about refining capacity. Look, this has been an ongoing battle between the oil industry and the Biden administration, who's to blame, pointing fingers. We know that the gasoline prices at the pump, these high prices, a lot of this has to do with refining capacity and refining capacity that's been limited. And the oil industry has also criticized the Biden administration for not issuing new drilling leases.

I spoke to one energy expert that told me, look, refining capacities are huge investments. Nobody wants them in their backyard. And the industry has been warned that it is going into-- that all economies are going into green economies. So this will be an obsolete sort of investment 5 to 10 years from now. So a lot of issues to get into there. But of course, for the president, he also wants to seem as well, he wants to appear as well to the American people that he is doing something about these prices.

AKIKO FUJITA: Yeah, in many ways, this is a PR battle going into the midterm elections. Ines, you mentioned the capacity, but also the investment that's necessary here. And certainly, if you look at the 10-year outlook, where the market is headed, some would argue, well, there's no need for that investment because that demand, even though it's being really-- it's outpacing the supply right now, it's not going to be there with cars switching over to EVs, with more investments in green energy.

You said you've been speaking to some analysts on this trade. What are they telling you about how much higher this could all go, in terms of gas prices when we're already talking about more than $5 a gallon, national average?

INES FERRE: Yeah, that's right. And you've got 16 states where the average in those states are above that $5 national average. So I spoke to several analysts about where these prices will go, particularly this year, this summer, as people are filling up their tanks. One of them told me that he sees prices peaking at around $5.50 on a national average. He said, unfortunately, it would take a recession to kill demand. And that is what he sees is limiting the price on gasoline, is if you see that demand destruction. And we are starting to see signs of that demand destruction.

I spoke to another expert. She says that she sees prices anywhere between $5 and $5.50 a gallon. You remember when JP Morgan's analysts came out and said that they could see prices going to $6 a gallon by August. But the feeling is, is that by the time that you get to $6, there's just too much demand destruction that there already would be some type of slowdown of recession.

In fact, I also spoke to Tom Kloza. He said to me-- an energy analyst as well. He says that the national average could be slipping in the next several days. You may actually see it go below $5 a gallon because of that demand destruction. In fact, today, according to AAA, the national average is at $5 and one penny, whereas yesterday, it was $5.02. So it did drop down by one penny. But again, these are national averages. In a lot of places, you see these gas prices above this.

AKIKO FUJITA: Yeah, well, at this point, no question drivers will take any relief that comes their way. Ines, I appreciate you keeping a close watch on that.