Oil price rise fuels fears on inflation

International oil prices hit a record on Friday as US drivers hit the roads on their annual summer holiday. The rise – to $75.78 a barrel – stoked fears that inflation could rise, causing share prices in the US and Europe to slip.

Demand for petrol in the US, the world’s biggest consumer, has jumped to 9.6m barrels a day in the past four weeks. This has caused concern that refineries, still struggling after last year’s devastating hurricanes shut down more than 10 per cent of the US’s capacity, could have trouble keeping up by producing enough petrol.

Refiners are in the process of updating their plants so that they can process heavy, sour crude oil, which is now increasingly in supply, as well as the light, sweet, crude oil, whose volumes are dwindling as oil fields – such as those in the North Sea – which the world has come to rely on, run dry.
A barrel of light, sweet oil, produces more petrol than a barrel of the heavy, sour variety, which is more viscous and contains higher levels of sulphur. Light, sweet oil is especially important in the production of the environmentally friendlier forms of petrol that governments are demanding drivers use.

Joseph Stanislaw, senior independent energy adviser to Deloitte Consulting, said: “The fears are related to the summer time. Consumers are still driving and using petrol and the light crudes that produce a higher proportion of petrol are not in abundant supply. “

Financial Times