Oil Tops $90: Vucic Calls Meeting for Wednesday

Crude oil broke $90 a barrel this morning, July 20, sending the benchmark to its highest level of the year. The jump followed a Washington Post report on a possible expansion of US military action against Iran, which reopened the question of security in the Strait of Hormuz, the shipping lane that carries a fifth of the world’s oil supply.

Gas moved in step. On the Dutch TTF exchange, the benchmark for the European market, gas traded at a level equal to roughly $624 per 1,000 cubic metres, while European oil and gas reserves are falling in the middle of the pre-winter storage season. The mix of geopolitical risk and thinner reserves is pushing both commodities higher at the same moment.

Serbian President Aleksandar Vucic said he would hold a meeting on Wednesday over the renewed rise in world oil prices. He acknowledged uncertainty over the domestic response and said the state would do everything on its side, but that he was not a great optimist about the outcome. The government has already acted with a temporary 20 percent cut in the fuel excise, a move that absorbs part of the world-market increase before it reaches the pump.

What does $90 mean for NIS and its licence?

The key uncertainty for Serbia is not just the price of a barrel but the status of Naftna Industrija Srbije. Vucic voiced pessimism and doubt that the US Treasury’s OFAC would renew the licences for NIS and Hungary’s MOL past July 31, which would leave the company exposed to sanctions imposed over an ownership structure tied to Russian capital. The president disputed the optimism of Srbijagas director Dusan Bajatovic, who had earlier said the licence would be extended.

The gap in tone between the two officials is not a matter of style. NIS runs the country’s only refinery, in Pancevo, and most of the retail fuel network. If the licence lapses without renewal, the supply of refined products falls back on imports through the Adriatic pipeline and alternative routes, at higher logistics costs at the very moment the raw material itself is dearer. The domestic response therefore comes down not to one meeting but to two parallel equations: the world price of a barrel and the regulatory status of the sole refinery.

Who carries the weight of the price rise?

The temporary excise cut shifts part of the burden from consumers to the budget. A lower excise means less revenue per litre for the treasury, so every day of high world prices lengthens the fiscal cost of the measure. If oil stays above $90 for more than a few weeks, the pressure passes into transport costs and, through them, into a wider basket of goods, the classic channel of imported inflation for an import-dependent economy.

For now, three elements are known: the price has crossed a threshold that changes the arithmetic, the state has reached for the excise as a first shock absorber, and the NIS question remains open until the end of the month. Wednesday’s meeting and the OFAC deadline of July 31 fall within the same window of a few days, and that is when it will become clear whether the excise cut is the start of a broader package or an isolated measure.

Will a temporary excise cut be enough if oil stays above $90 through the end of the month?