The price of a barrel of Brent oil, which is equivalent to 42 US gallons, or about 159 liters, is now worth $87.73. It has never been so expensive since 2014. For motorists, a liter of diesel is sold for an average of €1.62 in France.
How to explain this rise in oil?
There are several reasons for this price increase. The price of oil is very volatile, it depends enormously on supply and demand. The arrival of the Omicron variant had dampened demand. In recent weeks, it has started to rise again since global health restrictions are less drastic than in previous waves. On the supply side, several productions have been stopped ” in Libya, Nigeria, Angola, Ecuador and more recently in Canada due to extreme cold “, according to Hussein Sayed, analyst for the brokerage firm Exinity.
Geopolitical tensions between Russia, the world’s third largest producer, and Ukraine as well as armed clashes between Houthi rebels in Yemen and Saudi Arabia further boosted prices of oil, notes ING analyst Warren Patterson.
Natural gas prices, which are still very high, are also contributing to the rise in oil prices. This results in “ an increase in demand for diesel and fuel oil to replace natural gas, wherever possible “, underlines Bjarne Schieldrop, analyst at SEB.
Why is fuel so expensive?
The price of fuel in France is made up for one third by the price of crude oil and for more than half by taxes distributed between VAT and the domestic consumption tax on energy products (TICPE), not to mention the refining and that of distribution. According to the French Union of Petroleum Industries (Ufip), for a liter of diesel fuel at €1.62, the taxes are 88 cents, i.e. more than 54% of the total price, a proportion that has fallen slightly since 2007. unleaded gasoline 95, taxes represent 57% of the price at the pump. The price of oil increases and so do taxes, which has a double effect on the increase at the pump.
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The price of diesel in France is at record highs but it is not the highest in Europe. © Infographic
What can the government do?
In theory the government could lower fuel taxes. But in a context of budget deficit, they are an important income for the State. In mid-October, when the price of diesel was 10 cents lower than at present, the Minister for Ecological Transition, Barbara Pompili, called on distributors to ” make a gesture […] by reducing their margins “. The president of Ufip then underlined that the net margin of distributors ” is of the order of a penny per liter “. Finally, the government had opted for the “energy check” of €100, paid in December 2021 to 38 million French people earning less than €2,000 net per month.
Will fuel prices increase further?
It’s hard to predict. Oil-producing countries benefit from the current price. « Only members of the Organization of the Petroleum Exporting Countries (OPEC) and their allies can lower prices at this point by pumping more crude “says Mr. Sayed. ” Instead, they are likely to stick with their strategy of gradually easing production cuts as they take advantage of the current high prices. “, he continues.
Especially since, according to Carsten Fritsch, an analyst at Commerzbank, demand is growing but twenty-three member countries are struggling to reach the quotas set during the last negotiations. The price of a barrel of oil will probably continue to rise but it is still far from the historic peak recorded in 2008 at the height of the crisis of subprime reaching $147. The price then collapsed.
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