Increasing Energy Prices Caused by Fear of Inflation

Luc Filip does not work for a large Energy firm or a maker of industrial goods. He isn’t an OPEC official or a day trader. However, he continues to play a role in the rise in oil prices. Mr. Filip, the head of investments at SYZ Private Banking in Switzerland, is worried that inflation would eat into the $28.5 billion in client assets he handles. As a result, he has been purchasing oil. As a result, Mr. Filip and other fund managers are helping to fuel a surge that has pushed oil prices to their highest level since the 2014 Energy crisis.

While Energy futures markets are usually the domain of producers and commodities-focused hedge funds, the oil surge that shows no signs of slowing is suddenly pulling regular money managers who handle stock and bond portfolios. Commodity prices tend to rise in tandem with inflation, so they can help shield investment portfolios from its corrosive consequences.

As a result, Energy is “quite a solid hedge” when combined with other commodities like copper and gold, according to Mr. Filip. As a result, he has been buying Energy futures and selling longer-dated bonds that will lose value if inflation remains high for longer than projected.To be clear, concerns about inflation aren’t the primary cause of the West Texas benchmark’s rise from $62 per barrel in August to $85 per barrel this week.

The Organization of Petroleum Exporting Countries has committed to its goal of gradually increasing production. In addition, due to natural gas scarcity, some industrial enterprises have switched to diesel, which is derived from oil. It isn’t easy to untangle these inputs. However, traders and analysts believe that some of the recent oil increases could be explained by inflation concerns.