Oil price: Motorists are threatened with a new price shock
Created: 01/20/2022, 16:11
Consumers feel the price increases at the gas station.
(Iconic image) © Michael Gstettenbauer/Imago Images
Oil has become half as expensive in 2021 - but there is no end in sight to the rally.
Analysts expect the price of crude oil to be above $100 a barrel soon.
This is not good news for drivers.
London - A hundred dollars or more for a barrel of crude oil - according to estimates by US banks, this scenario could soon become reality.
The price* for a barrel (159 liters) of Brent has hit a seven-year high of $89, after rising 50 percent last year and another 14 percent since early 2022.
High energy prices are the biggest drivers of inflation
High energy prices are the number one driver of inflation anyway. However, experts estimate that one hundred euros per barrel of crude oil could reshuffle the cards in the interest rate game for central bankers. If energy prices don't fall, that would finally be the icing on the cake for price increases, says central bank expert Frederik Ducrozet from asset manager Pictet. After all, the central banks already feared a wage-price spiral.
Due to the rapidly rising inflation, trade unions could push through higher wages and companies could pass on increasing costs to consumers.
Such second-round effects then threaten to fuel inflation even further.
Consumers in the euro zone are already having to pay more and more money for their energy supply, as Jorge Garayo, inflation expert at Societe Generale, points out.
However, a hundred dollar barrel price could eventually create the very inflationary environment that is generating the consequential wage pressures.
Ten percent more expensive oil means 0.5 percent more inflation
It is already calculated for the euro zone that a ten percent increase in the price of oil will drive up inflation* by around 0.5 percent - even if such direct effects usually disappear again quickly. If the price of oil reaches $100 and stays at that level, the European Central Bank (ECB) will also have to recalculate: In its calculations, it assumes that the price of oil will be $77.50 this year and $69.40 by 2024 sinks.
However, Goldman Sachs sees the threshold of one hundred dollars per barrel already being reached by the middle of this year. According to JPMorgan, low inventories, scarce production capacities and political turbulence in several producing regions could even push the price up to $125 in 2022 and then to $150 in 2023. Even with a price tag of 100 dollars, the psychological effect should not be underestimated, say experts. Consumers feel the price increases at the gas station and when buying heating oil. And the peaks in inflation rates are already causing headaches for consumers, companies and politicians.
Consumer prices in Great Britain and the USA, for example, had recently reached levels that had last been seen decades ago.
Interest rate hikes by the Bank of England, for example, and the prospect of an imminent rate hike by the Fed have already somewhat dampened inflation expectations and decoupled them from the steeply rising oil price curve.
Antonio Cavarero, head of investment at the asset manager of the insurer Generali, also sees the ECB as having an obligation: If inflation settles at a level above the current forecast, all central banks would have to pursue more conservative approaches, including the ECB, said Cavarero.
ECB boss Lagarde: A quick turnaround in interest rates is not an issue
In the euro zone, inflation surprisingly rose to a record high of 5.0 percent in December.
This is the highest value since statistics began in 1997. However, the ECB is keeping its feet still.
On Thursday, the head of the central bank, Christine Lagarde, stressed that a rapid turnaround in interest rates was out of the question for the monetary authorities in Frankfurt.
She assumes that prices will stabilize in 2022 and that there will be a gradual decline, said the top European currency guardian.
Everything is not so dramatic - this thesis can also be defended with a view to the hundred-dollar mark in the oil price. According to this, the price increase of more than ten dollars forecast by Goldman Sachs in the next few months could not have such a large effect - simply because the inflation rates already reflect the jump in energy prices from a year ago. In addition, the economy in Western countries in particular is now less energy-intensive than it was ten years ago.
The development of oil prices when the high demand eases after the winter will be decisive for the development of inflation and thus for monetary policy.
The next few months should also show whether other inflation drivers, such as the far-reaching supply bottlenecks, will weaken.
And finally, the expensive oil could slow down consumption* and economic growth, which in turn could ebb energy demand and the oil price could fall again.
(rtr)
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