TheTrucker.com

Oil prices drop as nation waits for fuel prices to follow

Oil prices drop as nation waits for fuel prices to follow
Crude oil prices dropped Tuesday, but it could take a while before any relief is seen at the pump.

NEW YORK — Oil prices tumbled more than 6% Tuesday, taking some pressure off the world’s high inflation, and a barrel of U.S. crude fell below $97 after starting the week above $109.

But when will relief come at the pump?

With diesel fuel averaging more than $5 per gallon and gasoline at more than $4.30 per gallon on average, prices at the pump are crimping budgets across the nation.

If oil prices stay at this level, there could be more meaningful relief on the way at the pump, perhaps as much as 20 cents a gallon, predicted Tom Kloza, global head of energy analysis at the Oil Price Information Analysis, which tracks gasoline prices for AAA.

But it’s not surprising the drop in gasoline prices has trailed the drop in oil prices.

“(Fuel) prices can go up like a rocket and come down like a feather,” said Kloza.

Carl Hummel, owner and president of HOC Transport Co. in Akron, told the Akron, Ohio, Beacon Journal this week that his midsize company of about 75 trucks anticipated a major price increase and took what steps it could to lessen the impact.

“We bought two loads ahead,” he said in a phone interview Tuesday. “We bought extra fuel because we knew the price was going up.”

That will provide temporary relief, he said, but the long-term effect of higher diesel prices will be an ongoing burden for his company and the transportation industry as a whole. Fuel costs are just the latest roadblock for trucking companies, with driver shortages and extensive regulation a constant challenge.

Kulwant Singh, owner and president of Parhar Trucking in Akron, said in a phone interview Tuesday with the Beacon Journal that smaller companies like his are reeling from the rapid diesel price increases.

Singh’s company owns five trucks, delivering dry goods and produce from Florida, but is struggling with fuel costs.

“It’s crazy right now — it’s killing the freight industry,” he said. “It has been really hard on the transportation industry.”

Renewed COVID-19 worries come on top of a lengthy list of concerns for markets, which have caused wild hour-to-hour swings in recent weeks. The war in Ukraine catapulted prices for oil, wheat and other commodities the region produces. That’s raising the threat that already high inflation will persist and combine with a potentially stagnating economy.

Central banks around the world, meanwhile, are preparing to pull the plug on the support they poured into the global economy after the pandemic struck. The Federal Reserve is beginning a two-day meeting on interest rates, and the wide expectation is that it will announce on Wednesday an increase of 0.25 percentage points to its key short-term rate.

That would be the first increase since 2018, pulling it off its record low of nearly zero, and likely the first in a series of rate hikes. The Fed is trying to slow the economy enough to tamp down the high inflation sweeping the country, but not so much as to trigger a recession.

Inflation is already at its highest level in generations, and the most recent numbers don’t even include the surge in oil prices that occurred after Russia invaded Ukraine.

Data released Tuesday showed inflation was still very high at the wholesale level last month, but at least it wasn’t accelerating. Producer prices were 10% higher in February from a year earlier, the same rate as in January. On a month-to-month basis, inflation rose 0.8% in February from January, versus forecasts for 0.9%. That’s a slowdown from January’s 1.2% month-over-month inflation.

So the numbers are still very high and will keep the Fed on track to raise rates on Wednesday, economists said, but at least they weren’t worse than expected.

A separate survey by the Federal Reserve Bank of New York showed that manufacturing in the state declined for the first time since early in the pandemic. A weakening economy could make the Federal Reserve less aggressive about raising rates.

Treasury yields dipped immediately after the reports. The yield on the 10-year Treasury was holding at 2.14%, unchanged from late Monday. The two-year yield, which moves more on expectations for Fed policy changes, fell to 1.84% from 1.87%.

Also helping to pull down yields were the tumbling oil prices. A barrel of U.S. crude dropped 6% to $96.84. It had briefly topped $130 last week when worries about disruptions to supplies because of the war in Ukraine were at their height. Brent crude, the international standard, fell 6.5% to $99.90 per barrel.

A reprieve on fuel prices helped a wide variety of stocks, and the majority of companies in the S&P 500 were rising. Airlines led the way after several raised their forecasts for revenue this quarter. American Airlines, Delta Air Lines and United Airlines all soared 7% or more.

Tech and other high-growth stocks also recovered some of their earlier losses as Treasury yields fell. Higher interest rates can hurt such stocks more than others because they’re seen as more expensive relative to their earnings.

In overseas stock markets, European indexes were down modestly. Stocks in Shanghai slumped 5% and Hong Kong’s Hang Seng lost 5.7% despite the release of data showing strong increases in Chinese retail sales, industrial production and investment in January-February. It followed a decision by China’s central bank not to ease interest rates to spur economic growth.

Shares in Hong Kong have sunk to near six-year lows after the neighboring city of Shenzhen was ordered into a shutdown to combat China’s worst COVID-19 outbreak in two years.

“Fears continue to dog stock markets that lockdowns could spread, which would severely impact China’s growth,” Jeffrey Halley of Oanda said in a commentary.

In other developments, the London Metal Exchange said trading in nickel will resume Wednesday, just over a week after it was suspended when the price of the metal skyrocketed to over $100,000 per ton.

The announcement followed a notice from Tsingshan Holding Group, a Chinese metals giant, that it had struck a deal with its creditors on a “standstill arrangement” such that the banks would not make margin calls or close out their positions against the company while it is resolving its nickel margin and settlement requirements.

Russia is the world’s No. 3 producer of nickel. Its price and that of many other commodities has surged on speculation over possible disruptions to supplies as Russia contends with widening economic sanctions following its invasion of Ukraine.

The Trucker Staff contributed to this report.

The Associated Press Logo

The Associated Press is an independent global news organization dedicated to factual reporting. Founded in 1846, AP today remains the most trusted source of fast, accurate, unbiased news in all formats and the essential provider of the technology and services vital to the news business. The Trucker Media Group is subscriber of The Associated Press has been granted the license to use this content on TheTrucker.com and The Trucker newspaper in accordance with its Content License Agreement with The Associated Press.

Avatar for The Associated Press
The Associated Press is an independent global news organization dedicated to factual reporting. Founded in 1846, AP today remains the most trusted source of fast, accurate, unbiased news in all formats and the essential provider of the technology and services vital to the news business. The Trucker Media Group is subscriber of The Associated Press has been granted the license to use this content on TheTrucker.com and The Trucker newspaper in accordance with its Content License Agreement with The Associated Press.
For over 30 years, the objective of The Trucker editorial team has been to produce content focused on truck drivers that is relevant, objective and engaging. After reading this article, feel free to leave a comment about this article or the topics covered in this article for the author or the other readers to enjoy. Let them know what you think! We always enjoy hearing from our readers.

Oil prices drop as nation waits for fuel prices to follow

Comment

I like to start with saying that the Biden ministration or fucking idiot they are the whole problem of the situation right now we’re having in the US but fuel prices and prices on everything else is going out to ceiling the same thing happened when Obama took office the Democrats are stupid and they are trying so hard to make us a socialist country President Trump might have been an asshole but he was a good businessman he was putting his country back on his feet to be independent where we did not need supplies from other countries and he was still in office we would not have this issue with Russia . This used to be a self-sufficient country but a lot of people don’t know that our government system pays the American farmers not to farm they rather import stuff other countries so they can keep the market price high same thing with steel and copper and nickel and crude all the body ministration when he took office close thousands and thousands of drilling permit and stop keystone pipeline being worked on that put a lot of Americans out of work again Democrats are stupid

COMMENT ON THIS ARTICLE