This weekend the exit operation begins and millions of travelers will hit the road at the same time that the price of fuel is soaring. A liter of 95 octane gasoline, at the highest since October 2014, is sold this week in Spain at an average of 1.38 euros, while diesel costs 1.25 euros, the highest price since January 2020, according to data from the European Commission. Therefore, filling a tank of 55 liters of gasoline now costs about 76 euros, 10 euros more than in January; while if it is diesel it will be about 69 euros, 9 euros more than six months ago.
There are several factors that affect the price of fuel, but experts attribute the rise to the increase in the price of the raw material, oil, which represents 30% of the cost of gasoline. “Although they are not always directly related, at this time the price of crude oil is very important in the international price of fuels,” they explain in the Association of Petroleum Products Operators (AOP). Taxes, which represent 50% of the price of gasoline between VAT and hydrocarbon tax, influence even more, although in Spain they are lower than those charged on average in the European Union.
The price of a barrel of oil has grown unstoppably since the arrival of the first vaccines was announced in November 2020. Since then, the barrel brent, a benchmark in Europe, has doubled in value, from $ 38 to $ 76, pushing up the price of fuel. Far from reaching the top, the brent has advanced this Thursday about 2% and has marked a maximum in two and a half years.
The increase in the price of the barrel this Thursday occurred at the same time as the monthly meeting of OPEC +, the Organization of the Petroleum Exporting Countries (OPEC) together with allies such as Russia. The coalition, made up mainly of countries from the Middle East and Africa and responsible for the production of a third of the world’s oil, has limited the export of crude oil for a year, hiding behind the reduction in demand due to the pandemic. This drop in supply has strained the market for months and has raised the amounts in a context of economic reopening due to the advance in vaccination.
Insufficient oil for the next few months
This Thursday, the OPEC + ministerial committee has proposed to the rest of the members, as confirmed by sources familiar with the meeting to Reuters, to slightly open the oil tap, raising production by 0.4 million barrels each month, with a goal of two million barrels per day in December. It is a lower rate than the analysts expected. “Everything indicates that it will be insufficient,” explains Nereida González, from Afi Research. “It is estimated that two million more barrels per day are needed in the market to close the gap [la brecha] between demand and supply ”. This has led to the increase in the price of the barrel in the markets in anticipation of a shortage of supply in the short term, although the OPEC + proposal has yet to be ratified at the meeting they will hold this Friday afternoon.
If now about two million barrels are needed and only 400,000 are going to be added to production, that imbalance will go in crescendo in the next few months. OPEC itself estimates that throughout the second half of the year the world will consume six million more barrels each day compared to the first half of 2021, with no one, for the moment, going to supply that demand.
On the other hand, Diamantino Pedro, president of the OPEC Conference, argued this Thursday that increasing production even more would be risky, since the recent increase in infections in India, Africa, Latin America, Russia and the United Kingdom could lower world oil consumption for next year compared to expectations. “It will be important to continue with the supervision [de los recortes de producción] to avoid any possibility of a large oversupply in 2022 ″, he said in a video conference. “We have experienced many false sunrises during this pandemic, this is not the time to lower our guard,” he added.
Faced with this scenario of pandemic uncertainty, OPEC + has also proposed to its partners this Thursday to extend the oil production cuts until the end of 2022. The organization agreed last year to cut production by almost 10 million barrels per day starting in May 2020, with plans to phase out the cuts by the end of April 2022. The cuts now stand at about 5.8 million barrels of crude.
Analysts, for their part, estimate that the price of crude will fall after the summer and will continue to decline in the following months. The Consensus Economics panel, which includes the opinion of 29 banks and consulting firms, estimates that the brent it will end the year at $ 68. This prediction is from June, prior to the OPEC + meeting.
On the other side of the Atlantic, the United States, the world’s largest oil producer, will not, foreseeably, fill the crude production gap that OPEC + will leave due to the divestments of its companies, such as Chevron or Exxon Mobile, in oil and gas: “Given that US producers intend to maintain the agreed capital cuts, production is not expected to increase significantly in 2021,” they explain from the consulting firm Refinitiv.