Gulf crisis: Why fuel prices should remain high

Consumers are experiencing persistently high fuel prices, a situation that persists despite oil prices remaining below $80 per barrel and fluctuating geopolitical events. While crude oil prices have not reached the highs seen earlier in the year, factors beyond the raw commodity cost are impacting what drivers pay at the pump.

Geopolitical tensions, particularly in the Gulf, have led to significantly increased refining margins. Normally between $5 and $6 per barrel, these margins have climbed to between $10 and $15 since hostilities began in Iran. This wider gap between crude oil cost and refined product price directly contributes to higher consumer expenses.

Furthermore, the conflict in Ukraine is indirectly affecting fuel supplies. Ukrainian strikes on Russian oil facilities have led to domestic shortages in Russia, prompting Moscow to ban diesel exports to prioritize its own market. Although Europe has reduced its reliance on Russian oil products, such supply disruptions can still ripple through global markets and influence pricing.

The article suggests that a combination of these factors, elevated refining margins due to regional conflict and supply chain disruptions stemming from the war in Ukraine, are keeping fuel prices at a high level for consumers, even when the price of crude oil itself is relatively contained.