Fuel Price Forecasts — A Cocktail of Economics and Emotions 0 18

On one hand, the market is under pressure due to declining demand in China, rising interest rates, and economic stagnation in the Eurozone. On the other hand, significant uncertainty is created by the conflict in the Middle East and the question of the full restoration of shipping through the Strait of Hormuz.

In the current situation, it is more about the redistribution of financial capital flows rather than the so-called geopolitical risk premium. With the onset of the conflict, the gap between the physical oil and petroleum products market and the exchange, or so-called 'paper' market, has reached record levels. At the same time, fluctuations in world prices are usually felt by Latvian motorists within a few days, as all fuel importers purchase it based on formulas derived from international Platts quotes.

However, the dynamics of fuel prices are also influenced by a number of other factors: the temperature of the fuel, the euro to US dollar exchange rate, fluctuations in the prices of biofuel components (ethanol for gasoline and RME or HVO for diesel), the calculation period used for pricing, as well as the risk management policies of each trader, their market positioning, and business strategy.

This summer, motorists should assess their capabilities based on their own income and financial obligations, as fuel prices are beyond their control. Even local fuel sellers cannot significantly influence the final price, as its main components are determined by tax policy and the situation in the global market.

Currently, there is little sense in constructing specific price development scenarios. Forecasts of rising fuel costs are often a sale of fears, while promises of imminent price reductions are a sale of hopes. Retail fuel trading is not an emotion-driven business, but a risk management business.

At the same time, there are currently no issues with the supply of diesel and other petroleum products in the Baltic countries, so there are no reasons for concern about supply security. The main challenge remains high price volatility.

In the coming weeks, increased instability is likely to persist in international markets. Given the large number of potential negative scenarios, it is impractical to focus on any one outcome.

Therefore, in conditions of extreme uncertainty, the KOOL team focuses primarily on those factors that can be controlled: the quality of decision-making, effective communication, and professional risk management.