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Economist: Higher Fuel Prices Possible in Second Half of Year
🇱🇹 Lithuania /Economy & Trade

Economist: Higher Fuel Prices Possible in Second Half of Year

From Delfi · (7m ago) Lithuanian Mixed tone

Translated from Lithuanian, summarized and contextualized by DistantNews.

TLDR

  • Lithuanian economist Nerijus Mačiulis warns of potentially higher fuel prices in the second half of the year due to the Middle East conflict.
  • While the current energy crisis is less severe than in 2022, Europe faces a greater economic impact than the US due to its reliance on imported energy.
  • Despite higher inflation expected in Lithuania, Swedbank forecasts Lithuania's economy to grow by 3% this year, remaining the fastest in the Baltics.

Delfi reports on the economic outlook presented by Swedbank chief economist Nerijus Mačiulis, who cautions that the ongoing conflict in the Middle East could lead to significantly higher fuel prices in the latter half of the year. While acknowledging that the current energy crisis is less severe than the one experienced in 2022, Mačiulis highlights that Europe's dependence on imported oil and gas makes it more vulnerable to price hikes and economic repercussions compared to the United States.

Oil futures still show an expectation that the end of the Middle East crisis is just around the corner, but we see that ceasefires and US administration efforts are not enough here.

— Nerijus MačiulisSwedbank chief economist Nerijus Mačiulis discussed the market's expectations versus the reality of the Middle East conflict's impact on oil prices.

Mačiulis points out that while oil futures suggest an expectation of the Middle East crisis ending soon, the situation remains volatile. He specifically notes that continued naval blockades by Iran's Revolutionary Guard could exacerbate the price increases. Despite these concerns, the economist observes that natural gas prices remain considerably lower than in previous years, and electricity prices have not risen. Furthermore, stable supply of grains and other food commodities has kept their prices at a five-year low, contributing to a projected inflation rate below 3% for the Eurozone.

If Iran's Revolutionary Guard continues to blockade shipping, we could see much higher fuel prices, not just fuel prices, in the second half of this year.

— Nerijus MačiulisNerijus Mačiulis warned about the potential for significantly increased fuel prices if the conflict and blockades persist.

Despite the broader European economic challenges, Swedbank forecasts Lithuania's economy to grow by 3% this year, maintaining its position as the fastest-growing economy in the Baltic region. This growth is attributed to strong performance in export-oriented sectors, with Lithuanian manufacturing reaching new records. However, Lithuania is also expected to face the highest inflation in the region, exceeding 5%, driven by both external factors like rising oil prices and domestic issues. The European Central Bank is expected to tighten monetary policy by raising interest rates twice this year, though these are seen as short-term measures before potential reductions next year as energy prices stabilize.

However, the current energy crisis pales in comparison to what we saw in Europe in 2022.

— Nerijus MačiulisNerijus Mačiulis compared the current energy crisis to the more severe one in 2022.
DistantNews Editorial

Originally published by Delfi in Lithuanian. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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