Markets should pay less attention to the headline price of Brent crude and focus more closely on diesel, gasoline and jet-fuel prices, according to William Lee, Chief Economist at Global Economic Advisors.
Lee said the more important signal for consumers and the broader economy is the spread between crude and refined petroleum products, known as crack spreads. These indicate how much refiners are charging for products such as diesel, gasoline and jet fuel relative to the cost of crude.
"I would ask you and all of your fellow broadcasts to stop concentrating on the price of Brent and concentrate more on the price of the distillates," Lee said in an interview with NDTV Profit.
His argument comes as Middle East supply disruptions have pushed crude prices sharply higher, while refined fuel markets have faced their own constraints. Lee said the key bottleneck is not simply the number of barrels moving through the Strait of Hormuz, but whether there is enough refining capacity to process those barrels into products consumers actually use.
"Those are the products that people use," he said, adding that high prices for refined fuels could remain elevated even if additional crude supplies reach the market.
A significant portion of downstream petroleum products is refined domestically, while the government has absorbed part of the impact from higher crude prices.
Diesel Supply Emerges As Key Risk
Lee also flagged the possibility of tighter global diesel supplies if the US moves to restrict diesel exports. He said diesel prices of $6-$10 a gallon in the US would add to inflationary pressures because diesel is a critical input across transportation and industrial activity.
He said US energy policy could increasingly prioritise domestic fuel availability, potentially reducing diesel exports to countries including India.
Beyond oil, Lee pointed to the need for India to accelerate alternative energy sources. He cited small modular nuclear reactor technology as one potential way to supplement India's electricity grid and reduce dependence on imported oil for power generation.
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