European Producers and consumers faced significant price growth in 2022. Whilst Europe enters the new year with the continued burden of high prices, falling Oil and Gas prices alongside signs of cooling inflation in multiple countries give small signs to be hopeful for the new year.
The price of oil averaged 78.59 USD per barrel in the 1st half of December, that’s a third lower than it’s high in June and now below January 2022 levels. This week also saw gas prices drop as low as 76.78 Euros per Megawatt hour, a 10-month low for gas prices.
What Does this mean for European Logistics?
Rises in the price of Fuel following the invasion of Ukraine created a much more costly environment for European carriers, pushing European road freight prices up to all-time high. Falling Oil prices should help normalise market prices in the new year after major lanes showed signs of prices falls in September and October. Lower energy prices should also ease pressure on European producers who’s returns are being hurt from both falling consumption and rising prices. As economic activity cools and inflation stabilises this should mean producers can avoid large lay-offs and protect their operating margins. Whilst it’s clear that 2023 will see lower levels of consumer spending, stabilisation in inflation is a positive indicator that the continent will avoid an extreme scenario of demand destruction in the new year.
Whilst it’s now clear we live in very unpredictable times, falling prices are an indicator that costs in the logistics sector will continue to fall whilst stabilising inflation levels should prevent extreme demand destruction for goods in 2023.