Fuel Price Pulse – 13th June

Fuel prices this week:

Fuel Market Update – What’s Happening at the Pump?

Oil prices increased this week due to geopolitical risks, disrupted production, and shifting global supply dynamics. These developments have a direct impact on fuel prices at the pump, as crude oil is the largest cost component in gasoline and diesel pricing.

Middle East escalation

Israel launched airstrikes on Iran today (Friday 13th), targeting nuclear sites and missile factories, and killing key military leaders. Although energy infrastructure was not hit, Iran has vowed to retaliate, raising fears of escalation. This could affect the Strait of Hormuz—a vital shipping route which is used to transport nearly 25% of the world’s oil. Any threat or closure here would restrict global supply, lead to higher costs for refiners and increase fuel prices for consumers. 

Oil supply concerns

Canadian wildfires

Ongoing wildfires in Alberta, a major oil-producing region, have continued to disrupt oil production. This has resulted in fears of short-term supply shortages, especially for North American refiners. When the supply is constrained, the cost of oil increases. This often results in an increase in pressure on fuel prices at the pump.

OPEC+ and strategic reserves

OPEC+ is gradually easing its cuts, adding back nearly half a million barrels per day each month, with similar increases earmarked for July. However, with some uncertainty around supply contains and geopolitical risks, the IE announced that it may release up to 1.2 billion barrels from strategic reserves. This has been criticised by OPEC, which warned the move could create unnecessary panic. If producers and governments send mixed signals, market volatility may rise. Uncertainty often leads to speculative price increases, which are passed on to consumers via higher fuel prices.

Trade Talks and Tensions 

Investor sentiment improved as US-China trade negotiations made progress. Both countries agreed on a framework to resume cooperation and reduce export restrictions on rare earth elements. This has boosted global economic confidence. A stronger global economy generally increases energy demand. As demand rises faster than supply, crude oil prices – and consequently fuel prices – can increase.

Looking Ahead – oil prices next week

Despite OPEC’s assurances of sufficient supply, geopolitical tensions and supply disruptions are driving uncertainty. If conflict escalates or Iranian energy infrastructure is targeted, oil prices could rise further. We expect oil to trade sharply higher next week, which could translate into higher fuel costs at the pump globally.