By Isaac Cohen*
The end of one of the mildest winters on record in the northern hemisphere, together with Western Europe’s diversification away from Russian energy imports and economic weakness in China during 2022, have contributed to keep energy prices from becoming a main contributor to inflation.
For instance, regular gasoline prices in the United States came down during the second half of last year to less than $3.50 per gallon, while the economic slowdown in China caused the first drop in oil consumption in 40 years.
However, the International Energy Administration, the Paris based association of the main energy consumers, warned that the favorable conditions which existed last year may not be reproduced this year. For several reasons, it projects the demand for oil and gas will rebound throughout this year. https://www.iea.org/reports/oil-market-report-january-2023
First, demand for fuel in the northern hemisphere will increase as traveling intensifies with the mild weather. Second, the reopening of the main world importer of oil, due to the lifting in China of strict pandemic restrictions, will increase the demand for energy leading to higher prices. Third, fuel supplies from Russia, the third major world oil producer, depend on the impact of the sanctions imposed due to the war in Ukraine.
Therefore, the head of the International Energy Agency Fatih Birol, declared last week in Munich, “It is not right now to celebrate.”
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.