(Bloomberg) -- In the world of central banking, scrutinizing profit margins from refining crude oil probably hadn’t been seen as critical when it came to setting interest rates. Then energy markets started screaming chaos again.
While Brent crude futures surged above $100 this week, louder alarm bells are ringing over the prices of fuels that heat homes, power industry and keeps trucks moving around the world. They are showing even greater pressure than the headline oil price and threaten to have a wider impact on the economy.
For much of the Iran war, central bankers were able to ignore the energy supply hit from the conflict because worst-case scenarios were avoided. But while oil surges again, the prices of diesel and natural gas are climbing even faster in part as the Iran war shows little sign of a solution. Both sides show they could be gearing up for a protracted conflict.
The European Central Bank highlighted higher oil and gas prices as one of the potential risks pushing its inflation forecasts higher in the coming months.
“If I had talked to you about refining margins six months ago, we wouldn’t have known what we are really talking about,” ECB President Christine Lagarde said on Thursday after delivering a widely anticipated increase in the cost of borrowing. “Now, whether you call it the crack spread or the refining margin, on liquid fuel, now we all know what it’s about.”