Why lower oil prices won’t lead to lower inflation just yet
Lower oil prices generally lead to lower consumer fuel prices ... but not always.
There is a risk that models are overly tied to oil prices and that's leading to expectations of lower consumer and business prices but if you've seen the fuel pumps lately, you'd know that's not the case. The large gap has President Trump threatening oil companies but the problem is that refineries don't have the crude.
The problem is the crack spread. Refining crack spreads highlight the profit margin from turning crude oil into fuels, as “cracking” refers to breaking down heavy hydrocarbon molecules into lighter products. The 3-2-1 crack assumes a refinery buys three barrels of crude and produces two barrels of gasoline and one barrel of distillate, such as diesel or heating oil.
That spread is at a record high of $65. Meaning a refinry can buy a $71 barrel at spot and turn it into $136 of gasoline/diesel. That's likely because refineries were cautious to add inventory during the war or they were prevented from operating, like in the Hormuz area, where +10% of global oil products are refined.
"The result is a global tightness in refined products rather than crude oil itself, implying that consumers are likely to see only limited relief in fuel prices in the near term. Elevated transportation costs constitute another concern for the rest of consumer basket given still high diesel prices," writes National Bank today.
This article was written by flc97fe4880a4b454993821fe0b770a597 at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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