Oil slides again but gas and jet fuel don't
The economic picture is mixed. Some prices are going down, others remain fixed and interest rates could go higher.
American consumers woke Tuesday to a marketplace bending in several directions at once. Walmart said it will drop prices on thousands of items, including ground beef, cherries and a 24-pack of Coca-Cola, prompting President Trump to claim credit as inflation stays elevated.
Federal Reserve Governor Christopher Waller told an audience in Rome that the risks facing the central bank have "completely flipped," making a rate cut this year all but impossible and a hike more likely.
Global oil prices settled near their pre-Iran-war levels as Saudi Arabia unleashed the biggest official selling-price cut in more than two decades and the United Arab Emirates pushed exports toward record highs.
Jet-fuel costs have plunged 40 percent since April yet airlines have kept fares stubbornly high, betting travelers will keep paying.
Oil holds near pre-war levels as Saudis slash prices
Global oil markets settled Tuesday near where they stood before the U.S.-backed war with Iran began in late February, and consumers should feel the difference at the pump within weeks. Brent crude edged up 28 cents to $72.29 a barrel and West Texas Intermediate rose 29 cents to $68.84 in early Asian trading, Reuters reported — well below the wartime peak of $126 hit in late April.
The immediate catalyst is a supply glut, not weak demand. OPEC and its allies agreed Sunday to raise output targets by another 188,000 barrels a day in August, the third straight monthly increase, Reuters said. Saudi Aramco set its August official selling price for Arab Light crude sold to Asia at $1.50 a barrel below the Oman/Dubai benchmark — an $11 cut from July and the deepest month-on-month reduction in more than 20 years, per the Reuters commodities dispatch. The United Arab Emirates, which quit OPEC on May 1, saw June exports climb to 4.5 million barrels a day, with July shipments set to jump to 6.4 million bpd, less than 1 million bpd below pre-war levels, according to Kpler data cited by Reuters.
There are two catches for U.S. drivers. First, retailers do not pass savings through immediately: the gap between wholesale gasoline and pump prices has widened from roughly 20 cents to 40 cents a gallon over the past decade, The New York Times reported. Second, the Strategic Petroleum Reserve fell by 6.2 million barrels in the week ending July 3, to 319.5 million barrels — the lowest level since April 1983, according to Energy Department data cited by Reuters.
Any renewed Middle East disruption would find the SPR badly depleted. "The market has priced in a lot of the positive supply news, so the next leg in oil prices will depend on whether physical reality matches the optimistic headlines," Tim Waterer of KCM Trade told Reuters.
Jet fuel plunges, but airfares refuse to follow
Airlines are getting a big break on their single largest variable cost, yet the savings are not making it to the ticket counter. Jet-fuel prices doubled within weeks of the Iran war's outbreak in February and have since fallen 40 percent from their April peak, The Wall Street Journal reported. Yet carriers are not slashing fares or restoring the flights and routes they trimmed when oil surged.
The Journal said carriers are betting travelers will keep paying wartime prices even as fuel costs normalize — and so far the data support them. The Associated Press reported that Delta's next-generation Airbus A350-1000, arriving in 2027, will devote nearly half of its cabin to premium seating, and American Airlines plans to expand premium cabins by 50 percent by the end of the decade. Premium demand has held up while coach demand has softened, giving airlines little incentive to cut basic-economy fares.
The holiday weekend added its own turbulence. A ground stop caused by a BOSfuel supply problem at Boston Logan on Sunday night triggered 83 delays and 61 cancellations by Monday morning, CBS Boston reported. And a federal judge on Monday allowed a class-action lawsuit against United Airlines to proceed over so-called window seats that lack windows, Reuters said; Delta is fighting a similar case in Brooklyn federal court. For summer travelers, the takeaway is that cheaper oil will show up at the gas pump before it shows up on a boarding pass.
