The Energy Price Surge and COVID-19’s Two-Year Anniversary
Market Volatility

For many, March 2022 marks the second anniversary of COVID-19. For me, it’s also a two-year anniversary; at my job, living in a different city, and another American coast. I have moved several times in my life, between major cities and countries, but this move was certainly one for my personal storybook. I landed on the West Coast the day before I was due in the office, only to go into lockdown on day two of the new job. After 18 months of remote work, I was ecstatic when our San Francisco team headed back to the office. 

 

The big question remains: when will we be able to say the pandemic is over? It seems there are signs that we can see the light at the end of the tunnel with pre-pandemic practices emerging such as the daily commute, the reopening of businesses, and the airline industry’s revival.  

 

Looking back over the last two-years, the pandemic’s far-reaching and devastating impacts are easy to see. One area affected is the energy sector, with extreme price hikes for fossil fuels, particularly natural gas and oil. This was the result of increased demand as economies started to ramp back up. However, supplies were low because of a COVID-19-induced slowdown in production. This recent article reports a perception by OPEC and non-OPEC Russian oil producers that the Omicron variant will not have the same negative impact on the demand for oil as previous variants.  

 

This increase in demand has also been a result of electricity producers switching to oil as an alternative fuel, due to high gas prices in Europe and Asia and the restrictions placed on coal use as a high polluting fuel. The Russian coalition of oil producers predict demand will increase to pre-pandemic levels and have therefore increased their demand estimates to 200,000 barrels per day for 2022. 

 

The impact of this has seen Brent oil prices surge to over $90 per barrel. A recent article in the Wall Street Journal predicts it may increase to over $100. 

 

Needing to know your positions and exposures during this pricing volatility is critical to your business and bottom-line. Risk management technology has transformed over the last few years. 

  

If your organization is vulnerable to erratic market conditions, talk to us. We can definitely help.  

 

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