Released May 12, 2022 | SUGAR LAND
en
Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Researched by Industrial Info Resources (Sugar Land, Texas)--U.S. inflationary pressures eased in April, according to the latest federal figures, though commodity prices are squarely in the higher-for-longer territory in relative terms.
The U.S. Bureau of Labor Statistics reported that consumer prices increased by 0.3% in April, compared to the 1.2% surge in March. For energy, inflation is still high -- at 44.7% for the 12-month period ending in April -- but the gasoline component declined by 0.6% from March.
U.S. federal data show the average retail price of $4.21 for a gallon of regular unleaded gasoline for April. That marked a 2.5% decline from the prior month. Those data, however, are not indicative of more recent trends.
We noted Tuesday that U.S. retail gasoline and diesel prices both hit all-time highs this week at $4.37 per gallon and $5.55 per gallon, respectively. That means that consumers have less cash on hand to spend on anything from going out to eat, which was more expensive in April than in March, to medical care, where prices declined modestly month-to-month but are 3.5% more costly than last year.
Resurgent demand and supply-chain issues are to blame for some of the increase in consumer prices. Supply-side pressures emanating from sanctions imposed on Russia for violating Ukrainian sovereignty, meanwhile, are largely to blame for higher commodity prices.
Federal data show the price for Brent crude oil averaged $104.58 per barrel in April, a month-on-month decline of nearly 11% from May levels. Brent opened the trading day Wednesday at $101.61 per barrel, but was surging more than 5% on the back of fears about runaway inflation and a proposal in the European Union to shun Russian oil at a time when crude oil inventories are dangerously low.
The headlines, meanwhile, would suggest that the 0.3% drop in inflation is a sign that price increases are starting to moderate, though that should be taken with large caveats and a grain of salt. The price for Brent crude oil averaged $86.51 per barrel in January and retail gasoline prices were closer to $3.41 per gallon, near-giveaways compared with recent prices.
Year-on-year inflation, meanwhile, remains at 8.3%, nowhere near the benchmark of 2.5% targeted by U.S. economic policymakers. Neither that rate, nor $100 crude oil, should be seen as a good thing.
The last time retail gasoline prices were anywhere close to current levels was in 2008. Brent crude oil prices last touched triple digits in August 2014. Brent averaged $41 per barrel a year later.
Despite mounting concerns that major economies may experience a recession given the recent downturn in GDP readings and higher inflation, commodities may be in the midst of a higher-for-longer cycle.
In its short-term market report for May, the U.S. Energy Information Administration (EIA) forecasts that Brent crude oil would likely remain above the $100 mark for the rest of the year. EIA expects Brent will remain high, at an average of $97 per barrel, through late 2023.
"Although we forecast some price declines, the possibility for significant crude oil price increases and high volatility remains, given low inventory levels and the wide range of possible outcomes for oil supply, particularly from Russia," the EIA report read.
On supply and demand, the EIA expects a slump in demand, driven by a downturn in global economic growth. That forecast does not match with Wednesday's headlines suggesting the April cooling in inflation was a pivotal point. For supply, the EIA said that too will decline, offsetting some of the headwinds coming from economic malaise.
Any long-term forecast includes a lot of guesswork. None of the global factors -- inflation, economic growth, supply-side pressures -- were enough for the EIA to change its forecast for Brent. Meanwhile, should the energy transition return, investments would move away from fossil fuels, adding to the lingering supply-side issue.
Oil prices were already a growing concern before the outbreak of war in Ukraine. With no signs of a lull in the fighting, geopolitical pressures should contribute to higher-for-longer outlook for commodity prices for the foreseeable future. And should the war end sooner rather than later, Russia -- one of the world leaders in oil and natural gas production -- will remain something of a pariah state, joining the ranks of Iran as a major producer with few legitimate customers.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
The U.S. Bureau of Labor Statistics reported that consumer prices increased by 0.3% in April, compared to the 1.2% surge in March. For energy, inflation is still high -- at 44.7% for the 12-month period ending in April -- but the gasoline component declined by 0.6% from March.
U.S. federal data show the average retail price of $4.21 for a gallon of regular unleaded gasoline for April. That marked a 2.5% decline from the prior month. Those data, however, are not indicative of more recent trends.
We noted Tuesday that U.S. retail gasoline and diesel prices both hit all-time highs this week at $4.37 per gallon and $5.55 per gallon, respectively. That means that consumers have less cash on hand to spend on anything from going out to eat, which was more expensive in April than in March, to medical care, where prices declined modestly month-to-month but are 3.5% more costly than last year.
Resurgent demand and supply-chain issues are to blame for some of the increase in consumer prices. Supply-side pressures emanating from sanctions imposed on Russia for violating Ukrainian sovereignty, meanwhile, are largely to blame for higher commodity prices.
Federal data show the price for Brent crude oil averaged $104.58 per barrel in April, a month-on-month decline of nearly 11% from May levels. Brent opened the trading day Wednesday at $101.61 per barrel, but was surging more than 5% on the back of fears about runaway inflation and a proposal in the European Union to shun Russian oil at a time when crude oil inventories are dangerously low.
The headlines, meanwhile, would suggest that the 0.3% drop in inflation is a sign that price increases are starting to moderate, though that should be taken with large caveats and a grain of salt. The price for Brent crude oil averaged $86.51 per barrel in January and retail gasoline prices were closer to $3.41 per gallon, near-giveaways compared with recent prices.
Year-on-year inflation, meanwhile, remains at 8.3%, nowhere near the benchmark of 2.5% targeted by U.S. economic policymakers. Neither that rate, nor $100 crude oil, should be seen as a good thing.
The last time retail gasoline prices were anywhere close to current levels was in 2008. Brent crude oil prices last touched triple digits in August 2014. Brent averaged $41 per barrel a year later.
Despite mounting concerns that major economies may experience a recession given the recent downturn in GDP readings and higher inflation, commodities may be in the midst of a higher-for-longer cycle.
In its short-term market report for May, the U.S. Energy Information Administration (EIA) forecasts that Brent crude oil would likely remain above the $100 mark for the rest of the year. EIA expects Brent will remain high, at an average of $97 per barrel, through late 2023.
"Although we forecast some price declines, the possibility for significant crude oil price increases and high volatility remains, given low inventory levels and the wide range of possible outcomes for oil supply, particularly from Russia," the EIA report read.
On supply and demand, the EIA expects a slump in demand, driven by a downturn in global economic growth. That forecast does not match with Wednesday's headlines suggesting the April cooling in inflation was a pivotal point. For supply, the EIA said that too will decline, offsetting some of the headwinds coming from economic malaise.
Any long-term forecast includes a lot of guesswork. None of the global factors -- inflation, economic growth, supply-side pressures -- were enough for the EIA to change its forecast for Brent. Meanwhile, should the energy transition return, investments would move away from fossil fuels, adding to the lingering supply-side issue.
Oil prices were already a growing concern before the outbreak of war in Ukraine. With no signs of a lull in the fighting, geopolitical pressures should contribute to higher-for-longer outlook for commodity prices for the foreseeable future. And should the war end sooner rather than later, Russia -- one of the world leaders in oil and natural gas production -- will remain something of a pariah state, joining the ranks of Iran as a major producer with few legitimate customers.
Industrial Info Resources (IIR) is the world's leading provider of market intelligence across the upstream, midstream and downstream energy markets and all other major industrial markets. IIR's Global Market Intelligence Platform (GMI) supports our end-users across their core businesses, and helps them connect trends across multiple markets with access to real, qualified and validated project opportunities. Follow IIR on: LinkedIn.
