Ben Laidler, global markets strategist at the eToro trading and investment platform. The expert analyzes the evolution of gasoline prices: although Brent has risen above $80, “the price continues to fall by 5% in the last year and is 15% below recent highs,” which which represents “a small but welcome "tax reduction" for a relaxing American consumer where gasoline prices loom large." “The current rally in oil may be a false dawn now, but could become a reality later, depending on China's ability to boost its economy, firmer demand as rate cuts begin in the US and Europe , and the subsequent weakening of the dollar,” he points out.
RECOVERY:
Brent crude oil prices have risen above $80/bbl, which has somewhat alleviated the difficult situation with oil reserves, but the price is still down 5% in the last year and is 15% below from recent highs. This represents a small but welcome "tax break" for a relaxing American consumer with gasoline prices looming large.
The current rally in oil may be a false dawn now, but could become a reality later, depending on China's ability to boost its economy, firmer demand as rate cuts begin in the US and Europe, and the subsequent weakening of the dollar. Consumers call the shots for now, but changes may be coming.
PETROLEUM:
Brent crude oil has finally surpassed $80/bbl, with the rise of the Red Sea and geopolitical tensions producing circumstances other than the pandemic price increases. And the US is replenishing its strategic reserve, buying 3 million bbl. in December after its largest withdrawal in history. However, Brent continues to be held back by the difficulties of the Chinese economy, which is historically the largest importer of oil, and by the strength of the US dollar, which makes it more expensive for most in local currency.
We have also seen US oil production records of more than 13mbpd, along with increases from Brazil to Guyana. This has forced OPEC+ to deepen supply cuts, and to make them increasingly voluntary as internal tensions rise.
GASOLINE:
The suppression of Brent oil prices and the halving of refining crack spreads have caused US gasoline prices to fall to an average of $3.1/gallon.
This represents a downward push in inflation and a "tax reduction" for the consumer for six months: an annualized savings of $50 billion (see chart) compared to prices from a year ago. This is equivalent to twice the annual sales of Macy's, for example, but only 0.7% of the $7 trillion in US retail sales.
But it is still a positive fact, given the slowdown of the economy, and politically important, given the correlation of gasoline prices with presidential popularity. This enormous importance is due to the unique combination in the US of low fuel taxes, high average mileage and relatively low fuel efficiency.
