Energy prices at the end of 2021 were 59% higher than they were at the beginning of the year, according to a new report by the Energy Information Administration (EIA).
The boom in energy prices—which was more than the gains seen by other commodities—was largely the result of economic recovery from the Covid-19 pandemic. Most other commodity prices in the S&P Goldman Sachs Commodity Index (GSCI) saw about a 20% increase, with the exception of precious metals, which saw a decline.
Within the energy portion of the commodity index that tracks the performance of global commodities markets, RBOB (wholesale gasoline) saw the largest gain at 67%, followed by heating oil, then WTI and Brent. Gasoil and natural gas rounded out the energy segment of the GSCI.
WTI and Brent saw a 62% and 55% gain, respectively.
Bolstering the energy index prices included weather disruptions (including the February freeze and Hurricane Ida), as well as increased demand for gasoline and diesel, and an increased demand for crude oil and natural gas that outpaced production.
The Covid-19 pandemic drug down the investments in oil and gas to a near-record load, magnifying the discrepancy between crude oil supply and demand.
Crude oil production rose to 11.8 million bpd in the United States for the week ending December 24, the last week for which the EIA has supplied data, down from 13.1 million bpd in March 2020, when demand destruction was not yet evident in the market.
Ironically, it is these energy price spikes—in the United States and elsewhere—that may stymie further economic recovery.