Quick Thoughts: Energy Prices: Over the Barrel

Head of Franklin Templeton Investment Institute, Stephen Dover, hosted a special webinar to discuss rising oil prices and the fundamentals that would impact them in the future. Here are the key takeaways from his conversation with Frederick Fromm, Portfolio Manager and Energy Sector Research Analyst for Franklin Equity Group.

Listen to our podcast for the full conversation below.

Here are key thoughts:

    • Tight inventories and rising demand created an upward pressure on oil prices, even before the war in Ukraine. Sanctions against Russia have created additional strain on the oil supply, while demand for oil has already surpassed pre-pandemic levels, with international travel not yet fully restored.
    • Different grades of oil are hard to replace. Crude oil is refined into consumable products (such as gasoline, diesel, kerosene, etc.) with each refinery capable of processing specific grades of crude oil. For instance, China may have limited capacity to process the medium sour type of crude that is produced in Russia, while India can process various grades of oil and hence, has more flexibility to change suppliers.