Come On, Energy! 🛢

by 12 Oct, 2021

Come On, Energy!

Energy is one of most volatile sectors in the economy, and for good reason too. Although supply and demand are the major cause of moves in the market, random global events can fluctuate the price, and the economy can too. One thing to note, though, is that ever since oil went negative in 2020, it hasn’t looked back. At all. Unfortunately, that could pose a sizeable threat to the US economy, and it could bring back a familiar foe.

Since November, crude oil prices have almost doubled, and they are sitting above 80 dollars for the first time since 2014. Natural gas prices are also on a frenzy, leaving pump prices at an expensive level. This is because there is high demand for energy but not enough supply, and oil countries are choosing to slowly produce oil, leaving supply at a low level there. These high prices could lead to more inflation and decrease consumer spending as energy is an important indicator. Economists believe that for now, growth will likely decelerate, and inflation will pick up a bit, but if the energy situation gets worse it could completely halt the economic recovery and send us into a recession in 2022. Essentially, higher prices act as a tax to consumers, and this is the worry as a decrease in consumer spending could send us back a few steps in our way out of this recovery. Any recession would delay us, and we might end up facing the same problems once again in the next few months. What do you think about the risk of inflation?

I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.

 

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