De Nederlandsche Bank blog says latest energy shock differs from 2022 and may not trigger a new inflation wave

De Nederlandsche Bank has published an economist blog by Tjerk Kroes arguing that the recent easing in tensions involving Iran and the United States and the resulting fall in energy prices do not remove the need for vigilance from central bankers. The blog says the immediate hit to consumers appears to have eased, but the disruption has not fully passed because oil supply remains impaired. Its core message is that the current energy shock still matters for the economic outlook, even though the inflation picture is materially better than during the 2022 energy crisis. Kroes notes that Brent crude is still about USD 73 per barrel, more than 20% above the level at the end of last year, and recalls that DNB had considered a scenario with oil at USD 120 per barrel for a prolonged period, which would have implied recession and much higher inflation. He argues, however, that this shock differs from 2022 because gas prices, the main benchmark for Dutch energy costs, are far below the earlier peak at about EUR 46 per megawatt hour compared with spikes of EUR 337 per megawatt hour in summer 2022. The blog also points to better-functioning international supply chains, fewer shortages and the absence of a post-pandemic spending surge, all of which mean price pressures are playing a much smaller role. In that context, it says the European Central Bank is closely monitoring developments and that an energy price shock does not automatically have to lead to a broader inflation wave.