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Winter Arrives in Brazil on June 21, Tuesday. However, in the United States, the season is coming to an end! With this in mind, heating oil prices are skyrocketing, costing double the prices charged in 2021.
Heating oil is on the list of ‘commodities’ with the highest variation during the month of June. In short, its accumulated high reached 20% in just one month, stabilizing the sector. Furthermore, on this Monday, June 20, a day before the arrival of winter in Brazil, the futures contract rose by 1.2%. Industry is suffering.
Meanwhile, some ‘commodities’ are experiencing almost the same percentage, but in decline. Cotton number 2 saw a sharp decline of nearly 20% in just one month and is expected to present even lower prices in a few months, all depending on the decisions made by President Putin regarding the war between Russia and Ukraine.
Additionally, it is crucial to point out that the annual increase in heating oil reached one of the highest values in history for the sector, at 106.47%. Analysts dare to say that the increase was caused by the war between Russia and Ukraine while others claim that the COVID-19 pandemic tends to diminish the productivity of the industry. Thus, allowing for a reduction in production while the demand for the product continues to increase, prices tend to soar.
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The next few hours will be marked by increasing tension regarding the stance to be adopted by the Central Bank’s Monetary Policy Committee (Copom/BC) concerning the benchmark interest rate (Selic) at the end of this Wednesday’s (17th) meeting. Although the market is ‘divided’ on the committee’s decision, the stronger trend in recent weeks is that the rate will remain unchanged at the current level of 14.50% per year. Meanwhile, a minority faction still ‘bets’ on a 0.25 percentage point (p.p) decrease.
Heating Oil and the Economy
According to an article published in January by the portal of Gazeta News, the population of the United States was one of the hardest hit this year by the accumulated increase in heating oil due to heaters in the cold regions of the country. The use of oil in Brazil is not as common as it is in North American homes.
In the Midwest region of the United States, it is estimated that the increase reached 45% during the winter due to a significant rise in demand. Companies were unable to hold the elevated prices of ‘commodities’, which directly impacted consumers’ pockets.
Instability Rhythm in the Industry
The ‘commodities’ are facing a rhythm of instability due to supply and demand. Some have fallen too much while others have risen to the point of doubling prices because of high demand and low supply.
The heating sector was not the only one affected by this variation. A few days ago, news emerged in the media that Elon Musk was considering laying off at least 10% of his employees due to negative beliefs about the automotive and semiconductor market because of a shortage of metals for battery production for his electric cars. The news was announced following the leak of a corporate email between the businessman and his top-level employees.
Dimensional lumber, a crucial item for the construction industry, is also experiencing a significant increase when compared to its prices from 2020. Currently, it is being quoted at over US$ 500, whereas two years ago it was at US$ 250. Despite this, its decrease during the past year is at 32%.
Numerous sectors, due to global inflation triggered since 2020, are suffering from stagnation and decreased investments due to high prices of ‘commodities’. Thus, consumers end up having to pay more for the purchase of primary products.
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