Fuels in the Czech Republic can rise sharply, with the price of oil rising to $ 90 a barrel for the first time since 2014. The terrorist attack in the United Arab Emirates, tensions in Russia and also the unexpected course of the new coronavirus wave with the omicron mutation are to blame. On the contrary, growth is slowed by a strong koruna.
The price of Brent crude oil, which is decisive for fuel prices in the Czech Republic, rose yesterday at most since mid-October 2014, when the barrel first sold for more than $ 89. It cannot be ruled out that the psychological limit of $ 90 per barrel will “fall” today. The question of time then seems to be lowering the $ 100 per barrel mark, which will open the way for growth prices of petrol and diesel in the Czech Republic to a historical record, to levels of around 40 crowns per liter.
Next week, for the first time since November 2021, fuels in the Czech Republic will become significantly more expensive. In the past week, they have risen in price only in the order of pennies, in the next it will be around 20 pennies per liter. The price of petrol will then return above 37 crowns per liter during the first half of February and diesel above 36 crowns per liter.
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We are unable to cope with the draconian responsibilities in the transition to zero-emission electricity sources, says ODS Deputy Chairman Alexandr Vondra, MEP and member of the European Parliament’s Environment Committee. The interview took place shortly after a speech by President Miloš Zeman, who called for his resignation from the Green Agreement. And shortly before the European Commission can decide whether the core will be recognized as part of the European mix. According to Vondra, the Czech energy sector is and should be at the core.
Furthermore, there is a risk of a sharp rise in prices, as the oil market is overheated, but it does not have to cool down. Still by the end of March, fuel prices in the Czech Republic can rise to up to 40 crowns per liter. The relatively strong exchange rate of the koruna against the dollar – the Czech currency is close to its more than six-month highs – only partially dampens the impact of high oil prices on fuel prices in the Czech Republic. After all, this week the Brent barrel, after being converted into crowns, is sold for more than 1,900 crowns, which has happened since 2014 in just a few days in October 2018 and October 2021.
Terrorist attack in the Emirates and tensions in Russia
The immediate reason for the rise in oil prices is this week’s serious events: Tuesday’s explosion on an oil pipeline transporting raw materials from Iraq to Turkey and, in particular, Monday’s drone attack by Yemeni insurgents in the United Arab Emirates. The nervousness of the oil market is also exacerbated by the fact that Russia continues to concentrate its troops near the border with Ukraine. – A possible Russian invasion of the country would also potentially cripple oil or gas supplies.
The operation of the said pipeline in Turkey was resumed yesterday. The accident was caused by a fire, which according to local authorities was caused by bad weather, not sabotage. This information calmed the situation on the oil market.
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Last year, the prices of clothing and footwear in the Czech Republic jumped the most since the 1990s. According to the CZSO, they increased by 6.5 percent. In this way, they significantly surpassed their increase from 2020, by 3.7 percent, which was a record for the entire millennium, ie for the period since 2000.
However, tensions in the Middle East remain high due to Yemeni Husi rebels in Abu Dhabi. The insurgents are supported by Iran, so the situation is increasing tensions throughout the Middle East region. The United Arab Emirates is one of the world’s leading oil exporters.
Omicron affects the price of oil
A more permanent reason for rising oil prices is the global fading of the pandemic and the fact that the new covide variant, omicron, has not yet done the economic damage that many feared. Oil traders are thus looking forward to further growth in demand for it, which will be related to the resumption of world transport or tourism, including air transport. All this in the conditions of a relatively weak oil supply.
The supply of oil on the world market it is fundamentally weakening Russia, which is likely to make only a half increase in its oil production in the next six months compared to the increase agreed “on paper” with the OPEC cartel and other traditional miners. Many other mining countries of the cartel and its allies also have problems increasing mining. The reason is the long-standing uncertainty associated with the development of the pandemic and the related underinvestment of mining capacities. Underinvestment also occurs as a result of growing pressure to develop green resources, which of course do not include oil.
The price of Brent crude oil thus rose, according to the US bank Goldman Sachs may rise above $ 100 a barrel in the third quarter this year. According to other forecasts of international financial institutions, this may happen in the first quarter of this year. Therefore, it cannot be ruled out that fuels in the Czech Republic will start to become significantly more expensive again, up to the level of 40 crowns per liter of petrol in the coming months.
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