The end of the pandemic in Europe and the United States has caused a yoyo effect on the economy. In April 2020, when the world came to a standstill, there was a historic drop in the barrel of Texas, gas did not rise and the price of CO2 in Europe barely reached 20 euros / Tn.

However, a little over a year later, the picture is quite different. The rebound in travel and leisure activities in the Western world fuels demand for oil and depletes its supplies, according to Norbert Rücker, Head Economics and Next Generation Research de banco suizo Julius Baer.

For analysts, the market mood is improving and adding more tailwinds to prices. Oil prices run the risk of being exceeded in the short term and this only means that fossil fuel importing economies like Spain are going to suffer. And they will do it at the worst moment, when they need to reactivate their activity.

Oil, at record prices

According to Julius Baer, ​​oil prices appear to continue their slow and steady climb. There are similarities to an experienced mountain guide’s path to a peak in the Alps. The narrative has not changed. The Western world’s economic recovery and near-completion reopening are driving travel and leisure travel, resulting in strong demand for oil and depleting oil supplies.

The rebound looks particularly strong as it coincides with the travel season in Europe and the United States.

For the United States, “we project record demand for gasoline this summer and see storage to decline further below five-year average levels in the near term.”

The rebound in demand is likely to have a temporary element given its seasonal ingredients. However, reaching the peak depends not only on consumption but, more importantly, on production projections. Shale activity is recovering more slowly than usual, as investments are coming mainly from private, not public, producers.

Climatic influence

The global climate debate is paying off, for better and for worse. If companies or investors turn off the tap on fossil fuels before the international economy is ready, it will reduce supply while demand remains the same.

In fact, according to Ben Laidler, Global Markets Strategist for Multi-Asset Investment Platform eToro, the futures are in strong “retracement”, which indicates a decline. And this time it could be for two reasons.

The first is that the drivers of the carbon and ESG (environmental, social and governance) transition limit oil capital spending, and the second is that investors are demanding a return-to-liquidity approach, such as dividends, and no more capital expenditures.

The counting of platforms Baker Hughes, a proxy for drilling, is below half of 2018-19 levels despite oil returning to those trading levels. Also, since black gold’s pullback in markets anticipates lower prices, investors are cautious when financing new equity investments.

Fuel inflation becomes an economic pain point for countries like Spain. In short, prices will continue to rise. It will be necessary to tighten the belt because its increase in price is reflected in the fuels and from there, in the rest of the shopping basket.

Industrial prices, through the roof

The consequences are already being felt in Spain. Industrial prices rose 1.6% last May in relation to the previous month and shot up 15.3% year-on-year, its biggest rise since January 1983, according to him National Institute of Statistics (INE).

The year-on-year rebound in May, with which there are five consecutive months of year-on-year increases, is more than two points higher than the advance recorded in April (+ 12%).

The year-on-year increase in industrial prices in the fifth month of the year has been mainly due to energy, which raised its interannual rate almost four points, to 37.6%, the highest since December 1981. And all because of the rising cost of oil refining and gas production and, to a lesser extent, due to the higher cost of electricity production.

The gas and CO2 ratio

Another market that is influencing the electricity market is the price of CO2. It has already set a new record: 55 euros / Tn. And according Gas Exporting Countries Forum (GECF)This has a direct relationship with electricity prices that have driven out coal and now it is gas that sets the prices.

Gas and CO2 comparison

According Vertis Environmental Finance, one of the first consulting firms and traders in the CO2 markets, the carbon futures reference contract USA Dec21 continues with the upward trend. High gasoline and electricity prices, with no signs of abating as the heat wave spreads over the next week, do not forecast any downward changes.

The world, Europe and Spain face many months of high energy prices, and this means more expensive fuels, more expensive electricity and gas, the higher prices of fresh products because they pass on energy costs to the final consumer as well as industrial products. A tsunami that will leave victims in an economy, such as that of Spain, which has suffered especially the consequences of the pandemic in its star sector, tourism.


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