“As long as the war in Ukraine lasts, we will remain at very high crude oil prices”said Olivier Gantois, president of the French Union of Oil Industries (UFIP) as gasoline prices fell below two euros.

franceinfo: How can we explain this decline?

Olivier Gantois: There is a global fear of the recession. Whoever says economic recession, says drop in demand for oil and drop in demand for prices. The market somehow anticipates this recession, which is feared not only in North America, but also in China. But let’s not forget that we are still at very high crude oil prices, as we were at $ 114 a barrel.

Does this price displayed at the pump take into account the state discount of 18 cents?

Since April 1st there is a state discount of 15 cents excluding tax and 18 cents including tax for VAT payers, which is considerable. And therefore, this discount will apparently be extended until September 30, which is two months longer than initially announced.

Is it a one-time drop or will it be long-term?

I’m afraid it’s only temporary. That is not why prices will rise, but in any case, I think prices will remain high for a long time, at least as long as the war in Ukraine lasts. There are two phenomena that are causing prices to rise: the first is the world demand for oil which, after the 2020-2021 period of Covid-19, has returned to pre-Covid levels, around 100 million barrels per day; the second since the end of February, it was the war in Ukraine that created tensions on the markets and therefore made prices rise even more, hence the 114 dollars a barrel we have today. As long as the war in Ukraine lasts, crude oil prices will remain very high.

Could an increase in oil production lower prices?

Absolutely. That is to say, the organization of oil producing countries, OPEC plus Russia, meets every month to decide their level of production for the following month. And so, they met on July 1st and decided that their August production will increase by 600,000 barrels per day compared to July. So yes, production is on the rise because demand tends to increase.

Will this relax the market?

By relaxing the market for sure, and by lowering prices on the other hand, everything will depend on demand. If demand remains high because the global economy is doing well, prices will remain high. If there was a recession, as some analysts fear, it could bring prices down, but I don’t want to promise anything because nothing is certain.

Can you reassure us about a possible oil shortage in the coming months due to the Russian oil embargo?

Yes, I can reassure you completely as we have been working with the French authorities for several months to prepare for the embargo enacted on 4 June, which gives us six months to organize ourselves to completely stop supplies of crude oil and another two months for diesel. The good news is that we will not run out of oil as the oil we have imported from Russia, whether it is crude or diesel, we will import from North America, the Middle East, India. There are other sources of supply, some of which have already been implemented, which allows me to say that there will be no supply interruptions. However, the prices will remain high. We can’t have everything in the present period. If we are ready to buy Russian crude, we pay much less. If we don’t want Russian oil, we pay a little more.


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