Consumers will be glad to see oil prices softening on the back of Friday’s decline although it may be some time before this translates into lower prices at the pumps. The question of demand destruction has resurfaced after the Fed raised interest rates by a massive 75 basis points last week in an attempt to get a handle on soaring inflation.
Persistently high oil prices has threatened to reduce aggregate consumption of the commodity as individuals, corporates tighten their wallets and reduce fuel purchases. EU sanctions imposed on Russian oil exports and an already constrained supply chain has exacerbated the situation. In addition, OPEC’s waning spare capacity adds further upside pressure on prices when you consider that the organization has been unable to meet prior production targets.
