Global | Oil: a necessary burden, for now

Summary

Oil prices have been subject to high volatility over the past half century due to political factors and, more recently, due to its appetite as a financial asset. The last few months have been no exception.

Key points

• Key points:
• In 2021, the price of Brent crude increased by $26 per barrel, up 50%, but this masks a year-end slowdown triggered by the outbreak of the new COVID-19 variant.
• In just a few weeks, the price of oil reached levels not seen in 8 years. In contrast to what was seen previously, the rise boosted an acceleration of prices and widespread concern about the consequent strain on the economy after the downturn caused by the pandemic.
• The issue has resonated in different ways in different geographies. In the United States, gasoline prices shot up to 30-year highs for January in several states. Asia saw restrictive effects on production and heating. And in Europe, in a broader view of fossil fuels with natural gas at the center, there was strong pressure on electricity costs.
• But intense though these factors are, they are all short-term. Sooner or later, they will be resolved, and the question will be, what will oil prices do then?
• Over the medium term, we are likely to see oil prices that may be somewhat lower than currently, albeit still high for a commodity whose days are numbered.

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