Gasoline prices have hit their lowest level in two years despite the widening conflict in the Red Sea, raising fears they will rise.
The average price of petrol at the pump in the UK was 140 pence a liter on Tuesday, down 26 per cent from 199 pence in July two years ago. The price of diesel has now fallen to 148 cents per liter.
While attacks by Houthi rebels on ships in the Red Sea have increased in recent days, there are limited signs of disruption to the flow of crude oil and refined products such as diesel and gasoline to Europe.
Analysts and economists say the oil market is unlikely to see any major disruption for now as other sources of supply keep pace with demand.
This means pump prices are likely to fall further, RAC spokesman Simon Williams said.
“This is good news for drivers,” he added. “Oil prices have held steady below $80 a barrel since late November as there have been no major disruptions in the physical market.”
But if the conflict closes the Suez Canal for an extended period or cuts other sources of fuel for Europe, there could be a “dramatic” rise in prices, he warns.
In recent weeks, 350 ships have had to reroute around the Cape of Good Hope in South Africa.
The southern tip of the Red Sea, the Bab al-Mandab Strait, typically carries about 12 percent of the world’s offshore oil and 8 percent of its liquefied natural gas (LNG), according to the U.S. Energy Information Administration.
But with the high risk of ships becoming stranded or crew members killed, the situation has made the narrow strait, also known as the Gate of Tears, a no-go zone for many ships.
While these events carry additional risks and cost shipping companies time and money, the diversion option ensures they can continue to supply fuel to the European market.
A surprise surge in U.S. oil and gas production and exports is also helping to support global supplies, said Luke Bosdet, AA’s chief spokesman. In addition, growth in electric vehicle ownership in the UK is offsetting demand for petrol and diesel.
“If you look back 10 or 15 years ago, what happened in the Red Sea would have caused oil prices to skyrocket,” he said, adding that he expects prices to stabilize in the future.
Oil prices were relatively stable during the crisis. Brent crude, the international benchmark, fell below or near $80 a barrel after the shipping emergency.
However, a major conflict could close key waterways for oil transportation and disrupt trade flows. “Although supplies are not affected, everyone is keeping their fingers crossed,” Bosdet said.
Source: I News
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