Soaring Oil Prices and High Fuel Costs: Examining the Reasons Behind the Rising Brent Crude Price
In recent developments, the Brent crude oil price has seen a significant drop, offering promising conditions for alleviating the ongoing energy crisis. However, the outlook for Europe remains uncertain as today's figures for the IFO index indicate a trend towards a recession.
The current Brent price stands around the 79.36 USD mark, with a potential drop to 67.89 USD if it breaks below the crucial support line. This fall follows a dynamic rally that seems to have come to an end, signalling a prolonged period of weakness for Brent crude oil.
Despite this significant drop, gasoline and heating oil prices remain high. This is primarily due to the increasing CO2 tax applied in Germany, which adds about 16 cents per liter to gasoline and around 17.5 cents per liter to diesel in 2025. Additionally, geopolitical factors such as US sanctions on Russian oil exports, logistical bottlenecks, and production limits set by OPEC+ keep supply tight and prices high.
The breakout of Brent from the long-term trend channel has completed wave (1), suggesting a complex correction (abc-x-abc) for wave (B) may be forming. Whether a falling Brent oil price will be reflected in gasoline and heating oil prices is uncertain.
The energy crisis, in part, is self-inflicted. The high prices of gasoline and heating oil may be due to political motivations to reduce consumer demand or massive profits by a cartel. The weakened state of Brent crude oil suggests a potential decrease in demand and a possible recession in Europe.
A jump above the 1.38 resistance level (equivalent to 110.49 USD) would confirm a premature resolution of the correction scenario for Brent. However, a sustained break below the 79.36 USD support line opens the door to the 67.89 USD price level. A premature resolution of the correction scenario for Brent is not expected in the near future.
As Europe grapples with the energy crisis and the prospect of a recession, it becomes increasingly important to monitor the developments in the Brent crude oil market and its impact on the prices of gasoline and heating oil.
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