The prices of brent crude have surged by 44% in the calendar year 2021, which has been adding to the inflationary pressure across the economy.
Brent crude oil prices, as on date, stand at US$74.62 a barrel, compared with US$51.8 a barrel on close of 31 December 2020.
As countries across the world ease the restrictions that were put in place to thwart the spread of COVID-19 pandemic, the economic activity across the globe has started to pick up along with estimates of further recovery. Crude – a key input in any industrial production – saw pick-up in demand as countries need to keep their economies revving. Along with this, supply also was short as oil-producing nations had resorted to drastic supply cuts in 2020 at a time when crude oil prices were plunging and had even slipped into the negative zone.
So, this led to the basic economic problem of supply-demand mismatch with the current supply having a hard time keeping up with the demand.
The Organization of Petroleum Exporting Countries (OPEC) expects that the global crude oil demand will average 96.58 million barrels per day in 2021, a jump of 6.6% on a year-on-year basis. During the previous year, oil demand had fallen to 90.63 million bpd, the June report by OPEC said. The demand is expected to further accelerate in the second half of the year, it said.
Amid all this, international watchdog the International Energy Agency has asked all the major oil producing nations to “open the tap” in a bid to keep the world well oiled.
The surge in oil prices is leading to the surge in inflation across countries as crude oil is a key component in the inflation baskets across the world.