Fuel prices might have reached a temporary bottom

CEE Macro and FI Daily , 3. Okt.
Fuel prices might have reached a temporary bottom

Since mid-summer, drivers in CEE have experienced a consistent decline in fuel costs at gas stations. Among all CEE countries, nearly all report an annual decrease in NAT95 prices when converted to euros. Poland is the sole exception due to the base effect, as Orlen temporarily reduced their fuel prices exactly a year ago, diverging from the peers in CEE. The current decline is primarily attributed to the drop in oil prices, with Brent oil decreasing from $88 per barrel in July to $70 at the beginning of September. However, recent tensions in the Middle East have exerted upward pressure on oil. Since the end of last week, Brent oil has surged from around $71 to $76, in response to the escalating conflict between Israel, Iran, and Lebanon. While it is premature to assess the medium-term impact of the conflict on oil prices, we foresee an upside risk to higher prices at gas stations in CEE. Such a scenario would, in turn, exert upward pressure on inflation dynamics, which have so far benefited from declining fuel costs.