Jeff Currie: Forget $91 Brent, The Real Crisis Is $170 Diesel

Brent crude trading at $90.94 appears almost reasonable, but according to Jeff Currie, that is precisely the issue everyone is overlooking. The expert told CNBC that the real energy crisis is already evident in the fuels consumers actually purchase. Refineries are the consumers of crude oil, while everyone else consumes gasoline, diesel, and jet fuel. The markets for these products are significantly worse, according to Currie.

European diesel was reportedly trading at around $170 per barrel during the interview, nearly double the current Brent price of $90.94. West Texas Intermediate (WTI), on the other hand, was trading at $84.94 on Tuesday. Currie explained that the relationship between crude and refined product prices has broken down, a trend that began with the accumulation of around 100 million to 120 million barrels of crude trapped in the Strait of Hormuz following a surge in supply late last year.

China's reduction in refinery operations helped to contain crude prices, but it merely shifted the problem downstream. Currie also pointed out that governments have historically created the illusion of abundance during supply disruptions by releasing strategic reserves and using market manipulation tactics. However, this time, the scale, duration, and tight product market make this disruption distinct.

The implications for inflation are far from academic. Gasoline prices have reportedly risen by approximately 30% compared to a year ago, while diesel prices have increased by 46%. Diesel directly impacts trucking, shipping, and industrial costs. Currie believes that the crude-to-product market dislocation will eventually correct itself as refiners capitalize on historically high margins and increase production.

Until then, Brent's $91 price may provide an unrealistic picture of an oil market that consumers have not been part of for weeks.