Industrial Investment: Global gasoline prices are soaring, and inflation is on the rise again

Gasoline prices began to skyrocket everywhere.This is a major challenge for central banks and governmentsInflation harbinger。

US gasoline futures prices have justSoaring to a nine-month highIt shook the oil market, andGasoline prices in Asia are also on the riseDue to the unexpected shutdown of refineries and lower-than-normal inventories in major storage centers such as the U.S. Gulf Coast and Singapore,The global automotive fuel market is tightening.

In the global energy market, it is worth noting that although crude oil futures prices did not change much at the beginning of the year,U.S. gasoline contracts rose by more than 20%.The rebound in gasoline prices could cause headaches for central banks, including the Federal Reserve, as policymakers struggle with how much more to raise interest rates.

The price of gasoline is often a point of contention because for many people, it is as essential a daily expense as food and rent.Energy prices are one of many factors contributing to the rise in global inflation.In the United States, with the next election just over a year away, reining in oil prices will also be a key issue for President Biden, especially after he ordered the sale of a large portion of the National Strategic Petroleum Reserve last summer.

Andrew Hollenhorst, chief US economist at Citigroup, said:

"Rising energy costs could push up consumer prices and lead to a resurgence in commodity inflation, an area where price inflation has slowed."

From this perspective, Brett Ryan, a senior economist at Deutsche Bank AG, believes that every 1 cent increase in gasoline per gallon in the United States reduces annualized spending by about $1.15 billion. That means the $1.30 per gallon decrease in the second quarter saved consumers $150 billion, which they could spend on other goods and services. Ryan said,If prices continue to rise sharply, this tailwind could turn into a headwind, weighing on consumption.

Global situation

Low inventories and strong demand in major regions of the world have led to widespread increases in gasoline prices.In Europe, petrol prices have risen faster than crude oil prices, although this trend has not yet been fully transmitted to higher oil prices. Meanwhile, Singapore, a key trading hub in Asia, also saw prices rise due to lower-than-expected Chinese exports. In many emerging markets, governments are burdened by fuel subsidies in many countries for poor citizens.

Despite increased refining capacity in the Middle East and China, global gasoline supply has yet to recover significantly from historic lows.Even the United States has expanded its largest refinery in the past decade, and one refinery was unexpectedly delayed before it closed at the end of the year.

The expansions have not been enough to offset a string of unexpected shutdowns, including ExxonMobil's Baton Rouge unit in the United States, Shell's Pernis refinery in Rotterdam, and ENEOS Holdings' facility in Mizushima, Japan.With inventories still low, these disruptions have tightened supply even further.

Goldman Sachs analyst Callum Bruce said,Refining systems around the world are more prone to shutdowns after years of heavy operation.In addition, parts of Europe and AsiaRecord high temperaturesAlso makesIt is more difficult to use lighter crude oil。

As the world's largest crude oil importer,China's various indicators point to strong demandAccording to data from Baidu Inc., which is tracked by Bloomberg NEF, congestion in the 15 cities with the most car registrations has increased by about a quarter from January 2021. Meanwhile, commercial gasoline inventories are estimated to be at their lowest level since at least 2019.

Europe's Dilemma

In Europe, gasoline use is also picking up, with France, Germany, Spain, and Italy all seeing year-on-year increases in gasoline consumption.At the same time, the region is still facing challengesThe supply pressure caused by Russia's sanctionsThis has denied local refineries access to crude oil and other gasoline production feedstocks.

For example, due to the lack of heavy naphtha supplies from Russia,Shortage of feedstock for petrol production units (known as "reformers")Spartan Commodities said this led to a shortage of ingredients that increase the octane rating of gasoline, ultimately reducing the supply of gasoline suitable for European cars.

The switch from Russian knock-out product Ural crude to lighter U.S. crude has resulted in an excess of light naphtha, which can be blended into gasoline but requires other ingredients such as reformed oil. This furtherPushing up the cost of premium gasoline because it requires more reformed oil.

Wood Mackenzie Ltd. said that the recent out-of-season strength of diesel has also limited gasoline supplies. Mark Williams, head of research at the consultancy, said this has prompted refiners to increase diesel production, whileAt the expense of gasoline production,Societe Generale InvestmentRemind you that investing involves risks.