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(The Center Square) – Energy, crude and gasoline prices all rose in 2021 compared to 2020, reports the US Energy Information Agency. Prices rose due to higher demand and a host of other factors.
At the end of 2021, energy index commodities were trading 59% higher than on the first trading day of last year on the S&P Goldman Sachs Commodity Index (GSCI), the EIA reports.
The GSCI is a commodity index that tracks the performance of global commodity markets. It is a weighted average that is updated every year. In 2021, the energy index represented 54% of the GSCI, with the two crude oil benchmarks, West Texas Intermediate (WTI) and Brent, representing around 70% of the energy index. WTI crude oil accounts for the largest share of the overall GSCI at over 21%.
Most GSCI commodity indices are up around 20%, with only the precious metals index falling in 2021. As a percentage last year, the energy index was up more than double the index of industrial metals. Coffee is the only GSCI commodity that rose more than the energy index.
RBOB and ULSC petroleum product prices rose the most in 2021, trading up 67% and 64%, respectively, from 2020. RBOB is a grade of reformulated gasoline that is used as a benchmark for trading in gasoline ; ULSD is an ultra low sulfur diesel used as a benchmark for the fuel oil trade. Crude oil prices on WTI and Brent rose a little less, by 62% and 55%, respectively, in 2021.
Several factors contributed to higher energy commodity prices last year, the EIA notes, including weather disruptions such as the February freeze in Texas and Hurricane Ida, which significantly affected production in the Gulf. . Other factors included increased demand for gasoline and diesel and continued demand for crude oil and natural gas above the rate of production.
Crude oil prices have risen in 2021, with the spot price of Brent crude trading at $50 per barrel at the start of the year, rising to $86 per barrel at the end of October. Brent’s annual average of $71 a barrel in 2021 was the highest in the past three years. WTI averaged $3 a barrel lower than Brent in 2021.
According to the December 2021 EIA Short-Term Energy Outlook estimates, U.S. crude oil production in 2021 declined by 0.1 million barrels per day from 2020 and 1.1 million barrels per day from 2019. The EIA also estimated that oil inventories fell by 469 million barrels globally in 2021, “probably the largest annual inventory drawdown since 2007.”
Rising crude oil prices and increased demand for gasoline also contributed to the highest national average retail gasoline price since 2014. The national average rose to $3.01 per gallon in 2021 , with retail gasoline rising more than a dollar a gallon over the year. .
At the start of 2021, the national average retail gasoline price was $2.25 per gallon. It then topped the $3 per gallon mark on May 17 after disruptions to the Colonial Pipeline. Gasoline prices have continued to rise throughout 2021, with the average price peaking at $3.41 per gallon on November 8. The average retail price was $3.28 per gallon at the end of the year, more than a dollar higher than at the start of the year, EIA reports.
The lowest average of $2.67 a gallon was in the Gulf Coast states, with Texas reporting some of the lowest gasoline prices all year. The highest average of $3.70 per gallon was on the West Coast, with California reporting some of the highest gasoline prices.
From January 4 to December 27, 2021, retail gasoline prices increased by 88 cents per gallon in the Midwest, $1.20 per gallon in the Rockies and $1.32 per gallon on the West Coast, reports the EIA.
The spike in prices in the Rocky Mountains and the West Coast resulted from the closure of refineries in those regions, which led to reduced gasoline production and lower gasoline inventories, the EIA notes. The decline in production was compounded by the fact that demand increased due to increased visitor numbers to national parks, which also put pressure on already tight gasoline stocks, leading to an increase delivery and pump prices.
One of the main contributors to the rise in retail gasoline prices last year was the high price of crude oil, the EIA points out. The average crude oil price for 2021 was the highest since 2018, due to reduced refining capacity in the United States and low gasoline inventories that could not keep up with demand.