Recession of the barrel, mirage at the pump. We explained last week why the surge in prices at the pump would not stop anytime soon, driven by an accumulation of geopolitical fronts. Since then, the barrel has started a clear decline. French diesel continues to break records one after another. The two curves do not yet intersect, and there is an explanation for this discrepancy.
2.41 euros per liter, a record in the middle of the crisis
The liter of diesel stood at 2.4097 euros on average in France on Sunday, according to an AFP analysis relayed by franceinfo, based on the prices displayed by more than 8,700 service stations listed on the prix-carburants.gouv.fr website of the Ministry of the Economy. This threshold is added to an uninterrupted series of records since September 11, the previous one having been broken on Friday at 2.39 euros. The government was due to meet on Monday to decide on possible aid or the extension of measures already in place.
This outbreak does not come out of nowhere. In mid-September, the Houthi rebels claimed responsibility for new strikes against Saudi Arabia's east-west oil pipeline, which has since been shut down, while a production stoppage in Libya worsened the breakdown at the same time. Brent surpassed $107 per barrel a few days later, up nearly 20% in September alone.
Hormuz opens, oil plunges
Except that the mechanics stopped on Monday. The United States unexpectedly canceled planned strikes against the Houthis in Yemen, a first signal of de-escalation which immediately weighed on prices. On Tuesday, the movement grew: a senior Iranian official told Reuters that Tehran could reopen the Strait of Hormuz within seven days if Washington eases its military pressure and lifts the blockade targeting its ports. The Iranian delegation present at the UN General Assembly in New York would also have full authority to relaunch the discussions. This proposal was already transmitted via mediators on September 16.
Immediate consequence on prices: Brent fell on Tuesday towards 97-98 dollars per barrel (i.e. 2 to 3% less than the day before), while WTI oscillated between 89 and 93 dollars depending on flows. This is a clear decline compared to its September high. Two out of three fronts calming down in forty-eight hours is no small thing. There remains a third front, still active in the Red Sea, which has so far not experienced any comparable lull.
Why the pump hasn't felt the wind turning yet
A barrel that has fallen by several dollars in two days and a diesel that has just broken a record: the big gap is not inconsistent. The price at the pump follows the barrel with a lag of several days, sometimes several weeks. Between the moment when crude oil is purchased on the markets, refined, distributed and then displayed at stations, there is a transmission time that the average calculated by the Ministry of the Economy only reflects with a delay. Energy economists even have a name for the asymmetry of the phenomenon: prices at the pump rise like a rocket when the barrel flies away, and fall like a feather when it falls. In other words, we will probably have to wait before the decline that began this week is visible on the receipt.
There is also no guarantee that the decline will hold. A promise to reopen “within seven days” remains conditional on American gestures which have not yet been taken, and Tehran has already warned on Sunday that a resumption of American military operations would lead to a response “without limits or consideration”.
