Bethany Blankley, The Center Square
According to the U.S. Energy Information Agency, prices for gasoline, oil, and crude all rose in 2021 compared with 2020. The higher demand for energy and other factors contributed to the increase in prices.
By the end of 2021, commodities on the energy index traded 59% higher than they did on the first trading day last year on the S&P Goldman Sachs Commodity Index (GSCI), the EIA Reports.
The GSCI commodity index tracks global commodity markets performance. It’s a weighted average that’s updated every year. It made up 54% in the GSCI for 2021. The two benchmark crude oil prices, Brent (West Texas Intermediate) and Brent, account for about 70%. WTI crude oil makes up the majority of the overall GSCI, accounting for over 21%.
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The majority of GSCI commodity indexes saw an increase of around 20%. Only the precious metals index fell in 2021. Last year’s percentage growth of the energy index exceeded that of industrial metals. Only one GSCI commodity saw a higher increase in GSCI commodities than the energy index: coffee.
Prices of petroleum products RBOB/ULSC increased by the largest amount in 2021. These prices were 67% higher and 64% lower than 2020, respectively. RBOB is a reformulated grade of gasoline that’s used as the benchmark for gasoline trading; ULSD is ultra-low sulfur diesel that’s used as a benchmark for heating oil trading. In 2021, crude oils prices on Brent and WTI rose slightly, 62% and 55% less respectively.
According to EIA, there are many reasons for the increase in oil commodity prices, such as weather events like the Texas freeze and hurricane Ida in February, which had an impact on the Gulf’s production. Other factors included increased demand for gasoline and diesel and an ongoing demand for crude oil and natural gas that’s greater than the rate of production.
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The spot Brent crude oil price rose in 2021. It was trading at $50 per barrel at the start of 2019, and then rising to $86 per barrel late October. This year’s Brent average was $71 per bar, which is the highest in three years. The WTI’s average was $3 a barrel less than Brent’s in 2021.
According to EIA’s December 2021 Short-Term Energy Outlook EstimatesU.S. crude oil production fell by 0.01 million barrels per day in 2021 compared to 2020, and decreased by 1.1million barrels per day in 2019 The EIA also estimated that petroleum inventories decreased by 469 million barrels globally in 2021, “likely the largest annual inventory withdrawal since 2007.”
A combination of rising crude oil prices, increased gasoline demand and higher national average gasoline prices has resulted in the highest retail gasoline gasoline prices since 2014. In 2021 the national average price for gasoline was $3.01 per gallon. Retail gasoline prices increased by over a dollar each year.
The national average retail gasoline price at the start of 2021 was $2.25 per gallon. After disruptions to Colonial Pipeline, it reached $3 per gallon on May 17. The average gas price climbed steadily through 2021. It reached $3.41 per gallon on Nov. 8. EIA reported that the average retail price for gas was now $3.28 per gallon at the close of 2018. This is more than a dollar less than the starting of the year.
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In the Gulf Coast States, the average gas price was $2.67 per gallon. Texas reported some of the highest annual gas prices. California reported the highest average gas price at $3.70 per gallon, while the West Coast had the lowest.
The EIA reported that retail gasoline prices rose by $1.32 per gallon from Jan. 4, 2021 to December 27, 2021.
Refinery closings caused a spike in West Coast and Rocky Mountains prices. This resulted in lower production and higher gasoline inventories. The fact that less gasoline was produced was made worse by increased demand from visitors to national parks. This also put pressure on existing low inventories of gasoline, which in turn caused prices to rise as well as prices at the pumps.
High crude oil prices are a key factor behind the high gasoline retail prices in 2018, according to EIA. The average crude oil price for 2021 was the highest it has been since 2018, due to reduced U.S. refinery capacity, and low gasoline inventories that couldn’t keep up with demand.
This article was Syndicated by permission of The Center Square.