Market Musings 300923
Should we worry about rising oil prices today?
“Black gold” remains a key geopolitical lever for autocrats
Summary
A sharp spike in crude oil causes concern
But remember the tax take
Plus refining, marketing and distribution costs…
Refining margins can also vary a lot over time
High prices can be the solution to high prices…
Why crude oil will not spike above $100 (for long)
Conclusions: don’t panic!
Podcast
Why are pets good for you?
In this podcast, Edmund Shing and Charlotte de Kerpoisson discuss about the reasons for rising pet ownership in recent years.
The health benefits of caring for an animal
How are we humanising pets?
Ideas about investing in the pet industry
All my recent podcasts can be found on Apple podcasts (search for “BNP Paribas Wealth”) or Spotify (click on link here).
A sharp spike in crude oil causes concern
Brent crude, the benchmark crude oil price, has risen from $74 a barrel to $92/barrel today, in the last three months since July. There is a similar story if you look at the benchmark crude oil price West Texas in the US which also has risen by about 27%, to a similar price in the 90s today.
Brent crude oil +27% from March low
Source: tradingview.com
Why is this a problem? Well, because it's true that historically, inflation has tended to correlate closely with the oil price. And that's quite understandable given our dependence economically on energy.
But remember the tax take
But we should also remember, before we panic too much about rising crude oil prices, that even in the US, the gasoline price is only 50% driven by the crude oil price and 13% by taxes.
Decomposition of US gasoline price by component
Source: EIA
The rest is what we call refining, marketing, and distribution costs. Now, if you think about Europe, let's take the example of France, in fact the tax hit is of course much higher.
Decomposition of French diesel and petrol prices by component
Source: UFIP Énergies et Mobilités
It can…
