Oil cheap fuel prices will affect minimal

Consumers will notice

According to Tadas Povilauskas, chief economist of SEB Bank, raw oil is one third of fuel prices and fuel in the consumer basket is only 6 percent. goods and services.

« It is clear that the raw part of the oil is one third of the final fuel prices. However, the price decrease in the price of fuel is still 10 %, » said Povilauskas.

« The fuel accounts for about 6 percent of the total consumer goods and service basket, but if the oil price is at this level, it will mitigate the inflation, » he added.

According to the economist, if the oil prices of $ 64 per barrel is for a while, the benefits of this will certainly be reflected in consumers. In addition, if the euro is stronger than the dollar, the euro will also improve the affordability of fuel to Lithuanian consumers.

« If the prices that are these days, $ 63- $ 64 a barrel, it will be reflected in the gas stations of the gas stations. Of course, they have already decreased in March, there is an effect on Mr Trump’s policy.

« Because fuel prices are recalculated from wholesale prices, dollars are expressed, the stronger the euro, the lower the cost of fuel, » he said.

However, according to T. Povilauskas, oil prices have fallen not only because of Mr Trump’s actions, but also because of the decision of the OPEC+ (international organizations united by oil exports) to increase oil production. Therefore, according to him, the political decisions of the OPEC+ and the US may determine that former prices will return.

« Last week, at the OPEC+ regular meeting, the market shocked the news that since May, the cartel of oil has not been increased as before – 0.14 million, but 0.41 million barrels per day, » wrote T. Povilauskas in his Facebook account.

« History shows that political decisions can take the price deep down. However, the interests of OPEC+ and the US oil recipients are also clear – too cheap oil is not what they want.

Reality: The interests of OPEC+ and US oil recipients are clear – too cheap oil is not what they want, says Povilauskas. / Ž. Photo by Gedvila / ELTA

Panic effect

According to Citadele Bank’s chief economist Alexander Izgorodin, as a large proportion of fuel prices in Lithuania consist of various taxes, including fuel excise duties and value added tax (VAT) and the impact of oil rates are limited. He recalled that during the Covid-19 pandemic, when the oil value dropped sharply, the fuel prices were not close to zero.

« The final fuel prices will not fall so strongly. Because in Lithuania, much of fuel prices are made up of various taxes, VAT and excise duty. During the Covd-19 pandemic, we have seen that although oil fell almost to 0, fuel prices were certainly not so low, » Izgorodin said.

The economist estimates that oil prices are approaching the end. However, according to him, when the US and other countries have been negotiated due to lower rates, the market will stabilize and oil prices will rise up.

« This is not the end of the price fall. But I think we are quite close to it. In my opinion, the markets often move against the train and respond too negatively or positively to change. The acceleration of market falls is the same as at the beginning of pandemic.

« But the farther away, the more we see the messages that the US and partners are preparing for negotiations. As a result, the market panic will soon end, negotiations will begin and the result will be reduced, » he explained.

Mr Izgorodin added that the current Tariffs introduced by Trump are just a negotiation tool and they will be reduced.

The farther away, the more we will see the messages that the US and partners are preparing for negotiations. As a result, markets will expire soon, negotiations will begin and the result will be reduced.

« They will remain higher than before, but I think the current high tariffs – the Trump negotiation tactical tool. If the rates of this size are deleted, we will see prices upwards, » Izgorodin said.

In four years of lowlands

On Monday, oil prices reached the lowest point in four years.

In Europe, the Brent Oil Future Transactions cheaper 3.8 % to $ 63.10 a barrel, while WTI oil transactions fell 4.1 percent to $ 59.47.

Both contracts fell over 10 percent last week. and reached the lowest level from 2021. April. It happened when China, the world’s largest oil importer, said as of April 10 this year. starting 34 percent. tariffs for the entire US import. The EU should follow a Chinese example this week.

Oil moods also affected the OPEC+ accelerated oil production, while Saudi Arabia reduced its reference oil price for more than two years.