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Tadas Povilauskas, an economist at SEB Bank, says that retail prices tend to react quickly to fluctuations in the price of oil in Lithuania.
“Prices are reacting fast enough. Probably the price of oil has been growing steadily since the third quarter of last year and that growth has accelerated recently,” T. Povilauskas told BNS.
Arūnas Vizickas, founder of the price control portal pricer.lt, points out that there is a tendency in Lithuania for fuel prices to react quickly to rising oil prices and more slowly to falling prices.
However, he says that as demand for fuel fell during the pandemic, gas station networks felt increased competition.
“I would see two trends: service stations that have lost turnover compared to the pre-crisis period are trying to find a way to make money, but on the other hand they face more competition in the exhausted market: less consumption, less refills, maybe even smaller amounts. That prevents them from having bigger price differences, “A. Vizickas told BNS.
Oil demand is still significantly lower than before the pandemic, but the analyst says that even with the release of quarantine restrictions and economic recovery, the market may not recover very abruptly.
“The pretext for this (the price increase – BNS) is there, but it is possible that the market will carry it like a compressed spring to consumption. In reality, people live in stress for too long and begin to get used to living more rationally, saving, and unemployment increases, there is uncertainty. Rational consumption will not evaporate immediately, ”said the head of pricer.lt.
Prices will be determined by the consumers themselves
The price of oil is only one of the few components of the final price of fuel for consumers; it also includes VAT, excise duties, and oil refining costs.
A. Vizickas says that the price of oil is just one of the signs of rising prices; no less important is the factor of gas stations.
A price survey by pricer.lt conducted in February shows that the price of a liter of A95 petrol at the traditionally cheaper Lithuanian gas station, Jozita, was 1.08 euros, and the most expensive, Orlen, 1.22 euros.
According to A. Vizickas, there have been months before when the price of “scissors” was even higher. According to him, gas stations raise prices as much as the consumers themselves allow.
“If, for example, people are willing to pay a bonus of 10 to 20 cents per liter, then of course those gas stations will do it, they will collect as much as the consumer allows. If the consumer does not allow it, they will choose an alternative , the market law says that the gas station will have to review its limits, “he said.
Speaking about the dynamics of oil prices, T. Povilauskas says that demand is still declining, but prices have returned to the level of 70 US dollars due to the commitments made by the leaders of the OPEC + Saudi Arabia and Russia cartel to limit the oil production.
“The correlation between oil stocks and production is high, and there is a feeling that in the short term, if OPEC + sticks to equity (production restrictions – SNB), in the short term it may be that those $ 70 per barrel is a normal level, “said the economist.
At the same time, however, he noted that when oil prices rise, the US shale oil industry gets a bigger push to increase production and benefit from higher prices, which generally balances the price when increases production.
“Everybody understands the game: When the price of oil rises sharply, Americans with shale oil have the motivation to jump in quickly and increase oil production dramatically.” We understand that the Russians are afraid of it and the Arabs think that it will not happen so soon, ”said T. Povilauskas.
“Here’s the point: how abruptly will the US oil companies be able to do it in the next few months and if they want to increase shale oil production,” he said.
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