Why are oil prices rising while oil is falling? Business

The main reason the price of oil eased is that, as speculative froth blew through the oil market, there are growing signs of weakening demand in China – the biggest importer of crude. in the world. Several major Chinese cities are returning to lockdown as Beijing grapples with a new spike in Covid cases. This has led to a pause in activity in energy-intensive manufacturing hubs like Shenzhen.

At the same time, it is becoming clear that Western energy sanctions, while extremely severe, are not as strict as bellicose political rhetoric suggests. The United Kingdom and the European Union, for example, much more dependent on the energy exported by Moscow than the United States, will not ban Russian crude until the end of the year at the earliest.

What really matters to most people, however, is not the ins and outs of global energy markets, but the price they pay for their fuel. So last week when I met with Kwasi Kwarteng, Secretary of State for Business, Energy and Industrial Strategy, I asked him what he thought of the recent disconnect between the continued rise in prices gasoline and diesel and the drop in the price of crude oil.

“I’ve seen anecdotal evidence of this – I think we should get more information and it’s something we should focus on,” Kwarteng told me, in an interview for GB News. “But,” he continued, “I think it’s really bad and wrong for businesses to keep gasoline and diesel prices high to reflect rising oil prices, but then when those oil prices go down, to keep those gasoline and diesel prices higher.”

I reminded Kwarteng that he had met with several major oil companies a few days earlier at a “Prime Minister’s Energy Roundtable”. There have rightly been many meetings between energy industry insiders and ministers over the past few weeks. This Russian-Ukrainian conflict highlighted the UK’s chronic overreliance on imported energy. The UK government’s delayed energy security strategy document will be published this week.

“When you met with them, did you ask gasoline retailers about ongoing fuel price increases for motorists, even though oil prices have come down?” I asked Kwarteng.

“No – at this last meeting we focused on how to bring in more oil and gas from the North Sea,” he replied, to his credit. “But I will see many [the petrol retailers] soon,” Kwarteng continued, “and that is a point I will raise directly with them.

I’m happy to say that my meeting with Kwarteng sparked what I believe to be an important and far-reaching discussion. “When it comes to energy, it’s really worth having a long-term plan and for successive years we haven’t had a long-term plan,” he told me. “Over the past 30 years, governments have taken short-sighted views – and nowhere is this more apparent than in our attitude towards nuclear power, which has been dismal.”

While insisting that “net zero is something we want to achieve”, Kwarteng acknowledged that “how we get there and the means we use is widely debated”. He also said fracking “remains very controversial.”

These nuances will be explored further by energy sector investors and analysts. But what matters to most of us, as sanctions hit and the spiraling cost of living spirals out of control, is why gasoline and diesel prices are rising so rapidly when gasoline prices oil rise, but do not fall when the cost of crude falls.

Kwarteng understands that – and says he will soon be asking gasoline retailers for an explanation. I can’t wait to hear what they say.

Follow Liam on Twitter @liamhalligan