We explain why fuel prices have been falling (a little) for two months

We explain why fuel prices have been falling (a little) for two months

The drop is significant for the wallets of motorists. After having exceeded 2 euros per litre, the prices of petrol and diesel have been falling for two months. Pumps are on average up to 30 cents less than on July 1. The trend continues, according to the latest figures from the Ministry of Ecological Transition. On average, during the week of August 8, diesel sold at 1.79 euros per liter, almost 5 cents less than the previous week. Unleaded 95 recorded a drop of 6 cents to reach an average of 1.74 euros per litre.

This decline is largely linked to the international context. Franceinfo explains this drop in prices at the pump, even if fuel remains more expensive than in previous years.

Oil prices fall

The price paid by motorists at the pump depends directly on the price of crude oil traded on the markets. This represents nearly half the price per litre, according to Ufip. As a result, lower fuel prices “is explained essentially by that of those of crude oil”, according to Olivier Gantois, spokesperson for the oil industry in France, interviewed by franceinfo. Black gold prices soared at the start of Russia’s invasion of Ukraine in late February. But for more than two months, they have been falling.

The value of Brent, the European benchmark, stood at 93 dollars a barrel on August 17, against 110 at the end of July and 120 at the beginning of June, according to the quotations published by Boursorama. The price of oil thus recorded its lowest level since the beginning of the war in Ukraine.

The risk of recession weighs on Western countries

“Oil is a thermometer of economic activity”notes Anna Creti, professor of economics at Paris Dauphine University, in Le Figaro. The global economy needs oil to run. When activity slows down, the demand for barrels drops, and so does the price. However, the economy of several Western countries risks being harmed. To UNITED STATES in particular, inflation is at its highest. In response, the US central bank (Fed) raised its key rates, raising fears of a recession.

In Europe, the situation is no better. Eurozone growth forecasts have been revised downwards by the IMF. His world economic outlook report predicts GDP growth of 2.6% in 2022 and 2% in 2023, below its previous forecasts. In France, the Ministry of the Economy is also preparing for a slowdown in the economy in 2023.

China’s economy weakened by Covid-19

In China, the situation is also worrying, especially since the country is still affected by the Covid-19 epidemic. Faithful to its “zero Covid” strategy, Beijing continues to strictly confine several million people when cases are detected, which weakens its economy.

the IMF indeed observe “a more pronounced slowdown than expected in China following Covid-19 outbreaks and lockdowns”. But China consumes a lot of oil. When the most populous country in the world presses the brake, it is therefore the world consumption of oil which decreases.

The prospect of an Iranian nuclear agreement reassures

Iran is a major oil producer: the ninth, according to the US Energy Information Agency (in English). In 2018, before the United States pulled out of the Iran nuclear deal, Tehran was exporting around 2.45 million barrels a day, according to the US Congressional Research Service. But because of tensions, sanctions weigh on Iran and prevent it from selling its barrels on world markets.

In recent days, negotiations are progressing and the prospect of a new agreement is becoming clearer. “It looks like they are really trying to come to an agreement”, observes the analyst of Mizuho, ​​Robert Yawger, with AFP. If successful, “it’s the possibility of seeing a million more barrels a day on the market”emphasizes Robert Yawger, and more in the medium term.

Having been unable to export freely for four years, the country could also quickly release some 100 million barrels already pumped. This news reassures the markets, which anticipate an increase in volumes. Thus, when the resource is more abundant, the price tends to fall. For the specialist, the fall in the price of oil observed in recent weeks is also “mainly related to Iran”. “If the Iran nuclear deal is revived, it could push prices very close to $80”anticipates Edward Moya, market analyst at Oanda, in a note quoted by AFP.

In France, the discount at the pump will increase and reduce the bill a little more

A measure will also temporarily affect the price at the pump in France. The government fuel rebate of 18 cents will increase to 30 cents for September and October, before dropping to 10 cents for November and December.

Despite this aid and the drop that has been taking place for two months, prices remain at a high level, at more than 1.70 euros per litre. In August 2019, a liter of diesel cost 1.41 euros. A year later, it even fell to 1.23 euros.

However, this fall in prices should not continue. From the end of December, a European embargo on Russian oil is to come into force. The spokesman for the oil industry in France, Olivier Gantois, wants to be reassuring and affirms that this embargo “will have no impact on the consumer”. Rather, he is looking at price stabilization. “In my opinion, we will stay in prices like that until the end of the war in Ukraine”, he believes.

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