High diesel prices threaten to keep feeding euro-area inflation
Boris Vujcic, the European Central Bank's vice president, said at a meeting in Cleveland that diesel is likely to stay expensive for a long time and to feed into inflation, because it enters the cost of many products. He pointed to shrinking global refining capacity, strikes on Russian refineries, disruption around the Strait of Hormuz and Chinese refiners putting home demand first.
Economics & Markets··Morning
Diesel may stay expensive for a long time
Boris Vujcic, the European Central Bank's vice president, said at a meeting in Cleveland that diesel is likely to stay expensive for a long time. Because diesel enters the cost of many products, he said, that will feed into inflation. His words treat the rise in diesel not as a brief spike but as a source of inflation that could last. The European Central Bank's main task is price stability, so a lasting rise in fuel prices is one of the inflation risks it watches.[1]
Refining is shrinking and shipping is disrupted
On refining, Vujcic noted that the world's capacity is shrinking. In his account, drones striking refineries in Russia have cut supply, the Iran war has disrupted shipping in the Strait of Hormuz, and refiners in China seem to be serving home demand before exports. With wars in the Middle East and in Ukraine adding pressure, diesel prices have climbed to record highs.[1]
The export-ban idea jolted the market again
US President Donald Trump's backing this week for a diesel export ban shook the market again. The administration later played that prospect down. The supply side of the diesel market is thus being hit both by wars and by uncertainty over export decisions. Diesel is the main fuel of heavy transport such as trucks, farm machinery and ships.[1]
