Energy commodity prices increased by 59% in 2021, EIA reports

Oil well and storage tanks in the Texas Panhandle. (Jim Parkin / Shutterstock.com)

By Bethany Blankley, The Center Square

The prices of energy, crude and gasoline all increased in 2021 from 2020, the U.S. Energy Information Agency reports. Prices increased because of higher demand and a range of other factors.

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.

GSCI is a commodity index that tracks the performance of global commodities markets. It’s a weighted average that’s updated every year. In 2021, the energy index comprised 54% of the GSCI, with the two crude oil benchmarks, the West Texas Intermediate (WTI) and Brent, accounting for approximately 70% of the energy index. WTI crude oil accounts for the largest share of the overall GSCI of more than 21%.

Most GSCI commodity indexes increased by roughly 20%, with only the precious metals index declining in 2021. On a percentage basis last year, the energy index increased by more than double than the industrial metals index did. The only GSCI commodity that increased more than the energy index was coffee.

Prices for petroleum products RBOB and ULSC increased the most in 2021, trading higher by 67% and 64%, respectively, compared to 2020. 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. Prices for crude oils on the WTI and Brent increased slightly less, by 62% and 55%, respectively, in 2021.

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Several factors contributed to the higher energy commodity prices last year, the EIA notes, including weather disruptions such as the February freeze in Texas and Hurricane Ida, which greatly impacted production in the Gulf. 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.

Crude oil prices increased in 2021 with the spot price of Brent crude trading at $50 a barrel at the beginning of the year, increasing to $86 a barrel by late October. The 2021 Brent annual average of $71 a barrel was the highest it had been in the past 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 estimates, U.S. crude oil production in 2021 decreased by 0.1 million barrels a day from 2020 and by 1.1 million barrels a day from 2019. The EIA also estimated that petroleum inventories decreased by 469 million barrels globally in 2021, “likely the largest annual inventory withdrawal since 2007.”

One major contributor to high retail gasoline prices last year was high crude oil prices, the EIA points out. 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.

The Center Square is a 501(c)(3) non-profit focused on state- and local-level government and economic reporting.