The escalation of conflict in the Middle East has shaken the world oil market. Will fuel prices skyrocket?
Raw prices OIL on the global market jumped about 13 percent on Friday (June 10th) due to the new conflict Israel i Iran.
The question arises whether this war will lead to record retail prices of oil and oil derivatives as it happened in 2022 when Russia's invasion of Ukraine began and whether stocks should be stockpiled.
The interlocutors of "Vremen" believe that there is no need for it, they do not expect prices to skyrocket.
There is no indication that prices will jump like in 2022.
Tomislav Mićović, general secretary of the Association of Oil Companies of Serbia, reminds "Vreme" that this is not the first time that a sudden increase in prices has been recorded for psychological reasons and that nothing happens the next day.
"That's the first reaction of the stock market. You have many buyers of crude oil who have the obligation to fulfill long-term contracts, buyers who at that moment can buy larger quantities of crude oil until they see what will happen and they are ready to pay a few dollars more and have some increase on that day", explains Mićović.
And we have to wait a few days to see how the prices will move further.
"If the sudden jump in the price of crude oil is compensated by a decrease in the coming days, it will most likely not be felt in the price of fuel, but if a growth trend is established and if it lasts, then it will certainly be reflected in the prices of oil derivatives", Mićović adds.
He says that "this morning (June 16) trading started in the Far East" and that there is nowhere near such an eruptive jump as happened on Friday.
"As long as crude oil is exported from Iran, and all these war actions have not affected the export of crude oil from that country, until then Iran will not resort to any radical measures, such as the blockade of ships that export oil, which is the blockade of the Strait of Hormuz. The blockade of that strait would also block exports from Iran's largest port, so that measure would bring the state to themselves," adds the Secretary General of the Association of Oil Companies of Serbia.
The jump in the price of crude oil and the increase in the price of fuel at the pumps
The price of crude oil affects the retail price both when it rises and when it falls, but it is neither a fast process, nor is it so direct in both directions, and the retail price is also affected by other factors.
"Between the crude oil market, there is also the oil derivatives market, which is influenced by several parameters, not only the price of crude oil, such as the seasonal quotations of gasoline and diesel," notes Mićović.
Thus, in the previous five days, there was a serious increase in the quotation of gasoline and diesel, so, regardless of the fact that the dollar dropped a little, the prices of oil derivatives in Serbia increased by two dinars.
"It is the minimum to preserve the value of the goods that are placed on the market. On the one hand, seasonal influences, more intense trips in June, and even higher demand. As soon as the demand is slightly higher than the supply, prices rise. And vice versa," adds Mićović.
By reducing the excise duty, the sharp rise in prices can be reduced
Energy expert Miodrag Kapor also tells "Vreme" that we should not expect a significant increase in the prices of kerosene and its derivatives.
He explains that a lot goes into the price of fuel and that in retail stores lags behind what is happening on the world market.
Noting that the prices of oil and oil derivatives in Serbia are among the highest in the region due to high excise taxes, he says that by reducing excise taxes, if there is growth, fuel prices can be leveled.
"We have one of the highest excise taxes in the region at around 58 percent, a little less on diesel, which is why our fuel is the most expensive in the region. With excise taxes, that price can be leveled. And if the price rises, it can be lowered with excise taxes and remain almost the same for citizens in retail stores. Of course, that then has an impact on Serbia's budget," explains Kapor.
On a broader scale, prices should not change significantly.
"Although the price of oil has jumped the most now since the jump at the beginning of the conflict in Ukraine, it is still significantly lower than the record prices that were at the time. Expectations are that in the worst case a barrel could cost $90, but that is very questionable," says the interlocutor of "Vremen".
The market price depends on supply and demand and will fluctuate, but no significant increase is expected.
Even Kapor does not expect a blockade of the Strait of Hormuz, through which more than 20 percent of the world's oil production passes.
"That's not in anyone's interest, that's why Israel didn't bomb those ports. I don't expect any disruption regarding the flow of petroleum products through that strait. Nor is significant economic growth expected, especially in China, which means that the inflationary pressure on the price of oil has decreased, which is another reason why we shouldn't expect a significant increase in the price, and all of this is also reflected in the retail price of oil in Serbia," concludes Kapor.
Let us remind you that the maximum price of oil and oil derivatives at gas stations in Serbia is set by the Government on a weekly basis.
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