It will take years for the oil and gas market to recover from the “mother of all shocks,” according to a Harvard economist.

• Oil and gas prices have been hit by “the biggest shock of all,” according to a Harvard economist.

• Energy prices have seen wild swings since the pandemic, and the impact is still being felt.

• “When there is an energy shock, it can take a huge price change to balance the market,” Kenneth Rogoff said.

Oil and gas prices stuck on roller coaster caused by ‘mother of all shocks’ as pandemic-driven supply-demand imbalance continues to disrupt energy markets, says Kenneth Rogoff, a renowned economist.

The Harvard professor and former chief economist of the International Monetary Fund highlighted the wild ride that oil and gas prices have taken in recent years, with energy prices plummeting in the wake of the pandemic and skyrocketing when Russia began its full-scale invasion of Ukraine.

Brent crude plunged as low as $14 per barrel in 2020 before climbing to a high of $133 per barrel in June 2022. Similar fluctuations were seen in U.S. gas prices, which plunged to a low of $1.77 per gallon in 2020 before peaking around $5 per gallon. in 2022, according to Energy Information Administration.

Energy prices have fallen in recent months, with Brent trading around $80 a barrel and gas prices cooling to around $3 a gallon. This is largely due to fears of a looming recession in the United States and its potential impact on demand.

But over the long term, oil and gas prices are expected to trend upward – and prices are expected to continue to experience large periods of volatility as the unprecedented shock of the pandemic continues to ripple through the market.

“When there is an energy shock, it can take a huge change in price to balance the market. And the pandemic has been the mother of all shocks, causing the largest lasting change in demand since World War II” , Rogoff said.

Total global oil demand increased by 2.3 million barrels per day last year, according to the International Energy Agency. By 2050, demand could soar up to 42%, according to an EIA estimate.

More energy giants are investing to increase their crude oil production, with the United States seeing more $100 billion in oil mega-mergers in 2023. But it may be years before these investments solve the industry’s chronic problem. undersupply problemsome experts warn, meaning prices are likely to rise for the time being.

“Longer term, energy prices are expected to rise unless investment recovers strongly, which seems unlikely given current policy guidance. Supply and demand shocks will most likely continue to disrupt the energy market and the global economy,” Rogoff said.

The story continues

Higher demand for crude has been a boon for U.S. oil producers, with production hitting a record high. absolute record in 2023 as companies raced to meet the growing global appetite for crude oil. The EIA estimates that the United States produces on average 13.2 million barrels per day in 2024 and 13.4 million per day in 2025, with a view to new records for at least the next two years.

This story was originally published in January 2024.

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