![]() ![]() The gradual resumption of economic activity and travel was accompanied by an ongoing recovery in demand for oil. ![]() The subsequent rise in global energy commodity prices was partly a reflection of a rebound in demand for energy. Latest observations: (oil) April 2022 (gas). The last two months for gas quantity and industrial production are nowcasted. changes in heating demand owing to changing weather conditions. The gas-specific demand component identifies shocks to gas demand in Europe that are not driven by economic activity, e.g. Monthly gas model: the decomposition is based on a three-variable Bayesian vector autoregression (BVAR) where shocks are identified with sign restrictions, including euro area gas quantity (defined as imports + domestic production - exports - change in inventories), euro area gas price and euro area industrial production. The risk component identifies shocks to risks to future oil demand, whereas the economic activity component identifies shocks to current demand from changes in economic activity. Structural shocks are estimated using the spot price, the futures to spot spread, market expectations on oil price volatility and the stock price index. and Veronese, G., “ Global financial markets and oil price shocks in real time”, Working Paper Series, No 2472, ECB, September 2020. Sources: Refinitiv, Bloomberg, International Energy Agency (IEA) and ECB staff calculations. (daily cumulated percentage changes, since 1 January 2019) Oil and gas prices dropped at the onset of the pandemic owing to lower demand, while subsequent price increases have been driven by a combination of factors Both oil and gas prices have risen to well above pre-pandemic levels, with the European gas price reaching an all-time high, contributing in turn to record-high wholesale electricity prices (Chart 1). The rise in gas prices was particularly strong in the second half of 2021 and intensified even further in the first half of 2022, with European gas prices increasing by 145% since July 2021, while oil prices have increased by 46% over the same period. This is in contrast to the last episode of rapidly increasing energy commodity prices during the recovery from the 2008 financial crisis, when oil and gas prices stabilised at below pre-crisis levels. Since then, oil and gas prices have increased sharply, with gas prices already reaching pre-pandemic levels in September 2020 and oil prices doing so around February 2021. For instance, the Brent crude oil price dropped by 75% between February and April 2020, while the Dutch TTF gas price fell by 44%. ![]() The immediate decline in the oil price was particularly pronounced. 2 Energy market developmentsĮnergy commodity prices dropped considerably at the onset of the pandemic, followed by a recovery period and a subsequent surge, particularly in gas prices. As a result, consumer gas and electricity prices – both driven by natural gas prices – played an increasingly important role in developments in HICP energy and were accompanied by unprecedented cross-country heterogeneity in energy price developments. The increase in European gas prices since the summer of 2021 has been particularly sharp, reflecting a combination of supply and demand factors that left European gas inventories at historically low levels ahead of the winter season and the gas market vulnerable to supply and demand uncertainty, including from escalating geopolitical tensions. This development was aggravated in early 2022 by the Russian invasion of Ukraine. While the initial rise in energy prices was mainly driven by the recovery in energy demand following the easing of lockdown measures after the first wave of the pandemic, the subsequent price rally during 2021 was also significantly affected by supply-side issues. These increases followed a marked decline in energy prices at the onset of the coronavirus (COVID-19) pandemic. Record-high energy price increases at the end of 2021 and beginning of 2022 put significant pressures on the purchasing power of consumers. Published as part of the ECB Economic Bulletin, Issue 4/2022. Prepared by Friderike Kuik, Jakob Feveile Adolfsen, Eliza Magdalena Lis, Aidan Meyler Energy price developments in and out of the COVID-19 pandemic – from commodity prices to consumer prices ![]()
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