Soaring fuel prices are already causing demand destruction, according to the world's biggest oil trader
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- Soaring fuel costs are weighing on demand, according to leading oil trader Vitol.
- "There's very clear evidence out there of economic stress being caused," Mike Muller said.
- He said high gas prices could persist after doubting China will increase their export quotas.
Global fuel prices are surging, but consumers are getting squeezed and it's already starting to erode demand, according to leading oil trader Vitol.
Speaking on podcast hosted by Gulf Intelligence on Sunday, Vitol's head of Asia and other oil products Mike Muller said: "There's very clear evidence out there of economic stress being caused by the high prices, what some people refer to as demand destruction."
Gas prices are soaring as Western sanctions on Russian energy have cut supply of refined products and there's a growing possibility of an even bigger drop-off in Russian output. It's been worsened by operational struggles at refineries after the impact of COVID-19 and years of under-investment in the industry, Muller said.
A "high flat price will continue to trim away at demand and cause demand growth assumptions to be lower," he said.
In the US, the national average for a gallon of regular gasoline is $4.81, compared with last year's $3.13, according to data from the AAA. The rise in costs is a factor ultimately driving red-hot inflation in across the country, in which inflation rose by 8.6% through May to reach its highest in 41 years.
President Joe Biden on Thursday didn't appear to be able to offer much in the way of relief for American drivers, however, saying there may be no end in sight to rising fuel costs. High gas prices will continue for "as long as it takes," to punish Russia for its invasion of Ukraine, he said.
He's also slammed oil companies like ExxonMobil for reeling in huge profits as ordinary people pay hefty prices at the pump.
Addressing Asia, Muller doubts that China, which is a huge exporter of refined products, will increase their export quotas in the near future meaning gas prices may stay high.
"More Chinese export quotas would be welcomed by the market and would do something to normalize those margins, but my view, history tells us the last few months we'd be disappointed - the next book projects have not been increased," Muller said.
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