The central bank is no longer watching only oil prices—'crack spreads' have triggered an inflation alert.

The crack spread—the price difference between refined petroleum products and crude oil—is emerging as a new barometer for global central banks and markets to gauge inflationary pressures, its significance even beginning to surpass that of crude oil prices themselves. According to Bloomberg, Andrew Bailey, Governor of the Bank of England, stated that he is currently paying more attention to widening crack spreads than to crude oil prices. The European Central Bank (ECB) has likewise issued similar warnings: two regional conflicts have disrupted global refining capacity, tightening supplies of refined fuels; as a result, European consumers’ effective gasoline and diesel prices—when converted into crude oil equivalents—have already exceeded $370 per barrel. As supply constraints in the refining segment intensify, the transmission channel through which rising oil prices affect inflation is evolving. Vanguard, a leading global asset management firm, has begun hedging against the risk of U.S. inflation exceeding expectations; meanwhile, the Trump administration has pressured U.S. refiners to increase gasoline and diesel output to alleviate upward pressure on transportation costs stemming from fuel price hikes. Why are central banks shifting focus from 'watching oil prices' to 'watching crack spreads'? Bailey explained: 'What we actually consume is not crude oil, but its refined products.' In his view, the crack spread reflects the price premium generated when crude oil is processed into refined fuels such as gasoline and diesel. This means that even if crude oil prices rise only modestly, refined fuel prices may still surge sharply—should bottlenecks arise in the refining process—directly pushing up costs for consumers and businesses.

Major economic and financial events scheduled for September 7–13, 2026.

September 7–8 and beyond: Escalation of Middle East conflict (U.S.–Iran mutual attacks on tankers/ships; Houthi militants in Yemen attacking Saudi energy infrastructure), disruption to shipping through the Strait of Hormuz, and heightened global concerns over energy supply. September 8: International oil prices surge sharply, approaching USD 100 per barrel (Brent crude); U.S. equities decline notably (e.g., Dow Jones indices weaken significantly); U.S. Treasury yields rise to multi-year highs; global risk appetite deteriorates. September 9: China releases August economic data: CPI rose 0.8% year-on-year (0.4% month-on-month); PPI rose 3.8% year-on-year (rebounding 0.4% month-on-month), indicating modest demand recovery and pass-through effects from international commodity prices—alleviating some deflation concerns. September 9: Brent crude futures breach and close above USD 100 per barrel (reaching approx. USD 101), marking a recent high and intensifying expectations of global inflationary pressure. September 10: The European Central Bank (ECB) raises its three key policy rates by 25 basis points, lifting the deposit facility rate to 2.50%; it also revises upward certain inflation forecasts, emphasizing that Middle East conflict has intensified price pressures and that inflation will remain above target for longer. September 10: The U.S. releases August Producer Price Index (PPI) data: final-demand PPI rose 0.4% month-on-month and 5.4% year-on-year, with sharp increases in energy prices—especially diesel—serving as the primary driver, reinforcing upstream inflationary pressures. September 11: The U.S. releases August Consumer Price Index (CPI) data: CPI rose 0.4% month-on-month and 3.4% year-on-year (in line with expectations); however, core CPI rose approximately 0.3% month-on-month (above expectations), significantly raising market pricing for a Federal Reserve rate hike next week (probability rising to ~90%). U.S. equities rebounded that day but posted weekly losses overall; oil prices retreated somewhat yet still gained over 8% for the week.

ECB Vice President Warns Diesel Prices Threaten to Fuel Inflation

14 hours ago

ECB Vice President Boris Vujcic warned that high diesel prices driven by refining shortages and geopolitical conflicts threaten to fuel euro zone inflation. Supply disruptions from Ukraine and the Middle East are exacerbating energy cost pressures.

reuters

2026-09-25

ECB Vice President Warns Diesel Prices Threaten to Fuel Inflation

ECB Vice President Warns Diesel Prices Threaten to Fuel Inflation

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