Escalation in the Middle East causes oil prices to rise
Published: Monday, Oct 7th 2024, 13:20
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Fears of further escalation in the Middle East have driven up the price of crude oil over the past week. However, this does not necessarily translate into higher prices at the pumps at Swiss petrol stations.
The attack hit the Jewish state to the core: exactly one year ago, Hamas fighters from the Gaza Strip attacked southern Israel. Since then, the spiral of violence in the Middle East has been accelerating.
A new level of escalation was reached last week. Iran attacked Israel with missiles, whereupon Israel immediately threatened to retaliate. When US President Joe Biden was asked whether he would support an Israeli attack on Iranian oil facilities, he replied that this was being discussed in his administration.
This in turn had a direct impact on the commodity markets. The comments caused the price of crude oil to jump by almost 10%, which was the sharpest price increase since the beginning of 2023. A barrel (159 liters) of the well-known North Sea Brent crude thus cost around USD 78, and the price of US WTI crude also rose to around USD 75.
Region sits on a "powder keg"
The retaliation from Israel has so far failed to materialize. However, the question is not whether the retaliatory strike will come, but how extensive it will be and, above all, when Israel sees the right time for it, said market analyst Frank Sohlleder from ActivTrades. And Christian Henke from IG added: "The entire region is sitting on a powder keg."
Should Israel actually target Iran's oil facilities, this would probably have a major impact on the markets. Commodities expert Carsten Fritsch from Commerzbank pointed out that Iran recently produced up to 3.4 million barrels of oil per day. This corresponds to around three percent of the global oil supply.
In his opinion, a major outage would lead to a noticeable shortage in the oil supply. There is also a risk that Iran would block or at least hinder the sea route through the Strait of Hormuz, which is important for global oil trade, in the event of further escalation, according to Fritsch.
However, there are also voices among experts who believe a further escalation in the near future is unrealistic. The US government could be exerting pressure on Israel behind the scenes to wait until after the US elections in early November before retaliating, according to some.
And there are other factors that could dampen the rise in crude oil prices. According to analyst Ricardo Evangelista from ActivTrades, the expectation that several OPEC+ countries - above all Saudi Arabia - will increase their production from December, as well as generally weak demand due to the economic situation, particularly in China, are contributing to the prospects of sufficient supply.
Petrol price depends on many factors
And what does all this mean for the price of petrol at the pump? For the time being, probably not so much, because the price of crude oil is just one of many factors that influence the price of petrol. In addition to the price of crude oil as such, there are also procurement costs, government levies and distribution costs.
The price of a liter of petrol at the pump also depends on the cost of Rhine freight, as crude oil usually arrives in Switzerland by water. The exchange rate between the Swiss franc and the dollar also plays a role, as crude oil is traded in the US currency. If the franc rises against the dollar, the oil becomes cheaper.
According to Comparis, government levies include the mineral oil tax, the mineral oil tax surcharge and the import tax. Added to this is value added tax as a variable tax. Finally, the costs for operating the filling station, storing the fuel and advertising and marketing expenses are also included in the final price.
Currently around 1.75 francs
According to the international comparison website Globalpetrolprices.com, you currently have to pay around CHF 1.75 for a liter of unleaded petrol (95 octane) in Switzerland. Two months ago it was 1.85 francs, so petrol prices have not risen recently, but actually fallen.
However, as the surveys of the Touring Club Switzerland (TCS) show, there are large price differences between the individual filling stations: At the Scall filling station in Salmsach, Thurgau (near Romanshorn), for example, customers sometimes only had to pay CHF 1.53 for a liter of unleaded 95 at the weekend, according to the TCS price radar. In contrast, a liter of unleaded 95 cost CHF 1.81 at the Eni filling station on Zurich's Seestrasse.
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