Movements in oil prices are strongly tied to changes in gas prices. It is a global energy market, with U.S. and European oil prices strongly related. West Texas Intermediate (WTI) crude is the primary benchmark for United States oil prices and refers to oil extracted from U.S. wells. The chart below shows oil prices since January 2020. After beginning 2020 at nearly $60 per barrel, the price of oil tumbled with the onset of COVID and the resulting precipitous decline in economic activity, both in the United States and globally. In late April 2020, the price of WTI Crude had dropped to just over $16 per barrel, a drop of over 70% from its price at the start of the year. As economic growth and demand for energy returned, the price of oil began a fivefold increase from its April 2020 low of $16 to a high of just over $81 per barrel in October 2021. After peaking at $81 per barrel the price of oil declined to $71 per barrel in December. In 2022, Putin’s invasion of Ukraine has dominated energy market pricing, with concerns and uncertainty over supply leading to a spike in the price of oil to over $108 per barrel, an increase in price of over 50% since December. West Texas Intermediate Crude Oil Prices January 2020 – March 2022 Source: U.S. Energy Information Administration via Federal Reserve Economic Database
Inflation – It’s a Global Problem If it were only U.S. policies and issues causing inflation, then inflation would only be a U.S. problem. It’s not. Inflation has become a global problem. In January 2022 the World Bank stated: “Globally and in advanced economies, inflation is running at the highest rates since 2008. In emerging market and developing economies, it has reached its highest rate since 2011”. In April 2022 Eurostat indicated that annualized inflation in the European Union was approximately 7.5%. Similar to the U.S., energy was the driving force fueling the inflation, with energy prices increasing at an annualized rate of over 44% in March. The combination of exploding energy prices and lingering COVID driven supply chain issues have been the driving factors for global inflation. It’s not just a U.S. problem.
Central Wisconsin Report - Spring 2022
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