The price of oil is down sharply compared to last week. Crude oil fell by 4% due to two concomitant factors that calmed the markets. On the one hand, US President Donald Trump’s announcement of new negotiations with Iran. On the other, OPEC’s decision to increase production.
This could soon also have an effect on the cost of fuel. Over the weekend, petrol and diesel steadily exceeded 2 euros per litre, although, for now, these increases have not translated into a general growth in prices, given that inflation has remained at rather low levels and is decreasing.
Oil prices fell by 4%
On the morning of Monday 3 August the price of oil suddenly dropped:
- the WTI fell by 6% to 79.66 dollars a barrel;
- Brent fell by 5.16%, reaching 83.39 dollars a barrel.
It is the result of two factors. The first is Donald Trump’s announcements on the war in Iran. After threatening Tehran with an unprecedented attack “with a power not seen since the Second World War”, the US president withdrew everything, speaking of new talks for an agreement that provides for the reopening of the Strait of Hormuz and the elimination of Iran’s nuclear program.
Iran has denied any type of agreement. It is not the first time, during the war in the Middle East, that the US has threatened major attacks which they then never carry out.
OPEC+, the cartel of the major crude oil-producing countries, also helped the decline in oil prices by accepting an increase in production. This increased the supply of oil, causing prices to fall.
There may be no new production increases for a while
This increase in production had been predicted by the British News Agency Reuters in the past few weeks. The same one Reuters However, he also made it known that he had learned, from sources within OPEC, that the cartel does not foresee any further increases in production quotas until the end of the year. If the war were to prolong, therefore, no more help would arrive on this front.
The effects of the drop in oil prices on petrol and diesel
It will take a few days for this drop in oil prices to translate into a reduction in the cost of petrol and diesel at the pump. In fact, on the morning of Monday 3 August the fuel prices are:
- 2.003 euros per liter for petrol;
- 2.095 euros per liter for diesel.
The cost of diesel is partly mitigated by the reduction of excise duties through the mobile excise duty mechanism, which the Government introduced at the beginning of August.
Because inflation falls if the price of petrol rises
Although fuel prices in Italy are increasingly higher, this has not had a large effect on the prices of all other goods. Inflation in our country has fallen in the last two months.
This is not to say that increases in energy prices cannot still be passed on to the rest of the economy. In particular, as winter approaches, the cost of gas is the most worrying.
