Fuel prices have seen a significant drop this Monday, but what is driving this decline? According to DECO PROTeste, there are five key factors influencing this change.
1. Recession Prospect Slows Consumption
“The announcement of new tariffs on goods entering the United States, alongside retaliatory measures from other countries and their suspension, creates an environment of unpredictability and distrust in the global economy. This volatile international context may lead to a recession, with prospects of decreased corporate investment and household income. The anticipated economic contraction affects the consumption of energy products, such as fuels. With reduced consumption, there will be an excess supply of oil in the market, leading to a price reduction.”
2. OPEC+ Increases Market Oil Supply
“Countries like the US, Canada, and Brazil are producing record volumes of oil, and the Organization of the Petroleum Exporting Countries (OPEC+) has announced that starting in May, it will inject more oil into the market. It is expected that this increased oil supply will exert downward pressure on prices.”
3. Oil Prices Are Falling
“Besides the increase in oil supply driving price reductions, the energy sector always responds to current events and geopolitical situations, as seen in January when the price per barrel of oil reached $81, following three months of relatively stable prices between $70 and $75. This increase led to higher fuel costs for consumers. The trend is expected to reverse. In recent weeks, the price per barrel has started to fall, approaching values near $60 per barrel.”
4. Euro Appreciation Allows Cheaper Oil Purchases
“The price of a barrel of oil is expressed in dollars on international markets. One effect of the current geopolitical situation has been the appreciation of the euro against the dollar, meaning that a single euro now buys more dollars. This implies that Europeans can purchase the same quantity of oil for less, solely due to this exchange rate effect.”
5. Gasoline and Diesel Reference Prices Are Declining
“Data released by the National Entity for the Energy Sector (ENSE), which manages Portugal’s national strategic reserves of oil and petroleum products and calculates a daily reference price for fuels in Portugal, show that the reference prices for gasoline and diesel are falling. The average prices calculated this week will be reflected in the next, and so on, allowing for the anticipation of one of the largest fuel price declines in recent years.”
