Crude Prices Surpass $100 as Refineries Struggle with High Margins

Energy markets are signaling a potential winter crisis and rising interest rates due to ongoing conflicts in Iran and Ukraine. Brent crude futures surged above $100 this week, but prices of fuels such as diesel and natural gas are climbing even faster.

The European Central Bank highlighted higher oil and gas prices as one of the risks pushing its inflation forecasts higher. ECB President Christine Lagarde noted that refineries are struggling to process crude due to constrained capacity and high refining margins, also known as the crack spread.

Bank of England Governor Andrew Bailey pointed out that these refining margins are adding to price pressures. Diesel futures in some parts of the world are north of $200 a barrel, with taxes pushing consumer prices above $300.

The situation is far from disaster scenarios at the start of the Iran conflict, but traders and producers warn that global fuel markets face significant issues heading into winter. The world needs oil, but refinery capacity remains constrained.