Fuel prices are bouncing back this morning after a steep selloff yesterday, which moderated towards the end of the day. WTI crude sank as low as $65.50 before ending the day a dollar higher. This morning, prices continue rebounding, with fuel products picking up roughly 4 cents and crude up $2/bbl. Diesel remains 11 cents below its July peak, while gasoline prices are 9 cents away from their high.
Oil’s big drop this week is a reminder that fuel is a global commodity, not a local one. Although the economic recovery in North America has been robust, fuel prices are still sinking back. Restrictions enacted by Asian nations are creating demand fears, weighing on the market. Falling demand suppresses local prices, leading oil suppliers to swoop in and purchase the cheaper fuel to send elsewhere. This process, called arbitrage, ensures that low prices in one area trickle throughout the world.
In the US, the $1 billion infrastructure bill is set to pass the Senate today, and Senate leaders are planning to alter it via budget reconciliation to add several billion in additional spending. The House is in recess until late September, so the bill won’t become law for at least another month. Still, the prospects of additional government spending are helping oil markets today since spending will boost fuel demand in the future.
