Source: Golden Ten Data
I'm afraid it will take years for the energy market to recover under the suppression of the “mother of shock.”
Harvard professor and former IMF chief economist Kenneth Rogoff said that as the imbalance between supply and demand caused by the pandemic is still stirring up the energy market, oil and gas prices have fallen into a roller coaster caused by the “mother of all shocks.”
Rogoff pointed out that oil and gas prices have fluctuated sharply in the past few years. Energy prices first plummeted after the outbreak of the epidemic, then soared after the Russian-Ukrainian conflict.
The price of Brent crude oil fell to a low of $14 per barrel in 2020, then surged to a peak of $133 per barrel in June 2022. According to data from the US Energy Information Administration (EIA), US gas prices also experienced similar fluctuations, falling to a low of $1.77 per gallon in 2020 and then peaking at around $5 per gallon in 2022.
Energy prices have declined somewhat in recent months. The price of Brent crude oil has remained around $80 per barrel, and the price of natural gas has dropped to around $3 per gallon. This is due in large part to market fears that the US is about to fall into recession and its potential impact on demand.
However, in the long run, oil and gas prices are likely to tend to rise, and prices will continue to fluctuate greatly as the unprecedented impact of the pandemic continues to sweep through the market. Rogoff said:
“When there is an energy shock, huge price changes may be needed to clear the market. The pandemic was the root cause of all the shocks and brought about the biggest ongoing change in demand since World War II.”
Note: Market clearing (Market clearing) refers to any process in the market where the supply of a transaction equals demand, that is, “cleans up” excess supply or demand.
According to International Energy Agency (IEA) estimates, total global oil demand increased by 2.3 million barrels per day last year. The EIA predicts that demand could soar by 42% by 2050.
More and more energy giants are investing in increased crude oil production, and by 2023, more than $100 billion in US oil companies will undergo major mergers. However, some experts warn that these investments may take years to resolve the industry's chronic shortage of supply, which means that oil prices may rise temporarily.
The Harvard University professor said, “In the long run, energy prices will rise unless there is a significant increase in investment, but judging from current policy guidance, this seems unlikely. Supply and demand shocks are likely to continue to stir up energy markets and the global economy.
Increased demand for crude oil is a blessing for US oil producers. As companies compete to meet growing global demand for crude oil, US oil production reached an all-time high in 2023.
The EIA predicts that the average daily production of the United States will reach 13.2 million barrels in 2024, and 13.4 million barrels per day in 2025, setting a new record for at least the next two years.
edit/lambor