The Economist’s Frightening Warning: The Mother of All Shocks in Energy Markets

Renowned economist warns of the far-reaching effects of energy market shocks

In a recent statement, Harvard professor and former chief economist of the International Monetary Fund (IMF), Kenneth Rogoff, highlighted the dramatic fluctuations in oil and natural gas prices over the past few years. Rogoff drew attention to the sudden drop in energy prices during the pandemic and the subsequent rapid rise after Russia’s invasion of Ukraine.

According to Rogoff, Brent crude oil plummeted to $14 per barrel in 2020, only to soar to $133 per barrel in June 2022. Similarly, U.S. gas prices experienced significant fluctuations, reaching around $5 a gallon in 2022 after dropping to as low as $1.77 a gallon in 2020, as reported by the Energy Information Administration.

While energy prices have softened in recent months, with Brent trading at around $80 a barrel and gas prices around $3 per gallon, Rogoff cautioned that it will take years for the oil and gas market to recover from what he referred to as the ‘mother of all shocks’.

“When an energy shock occurs, it may take a large price change to clear the market. And the pandemic was the mother of all shocks, bringing the largest sustained change in demand since World War II,” Rogoff remarked.

The economist’s remarks serve as a sobering reminder of the long-term repercussions of major disruptions in the energy market. With the global economy still grappling with the aftermath of the pandemic and geopolitical tensions, the stability of energy prices remains a critical concern.

It is clear that the energy market will continue to face challenges as it seeks to regain equilibrium in the wake of unprecedented shocks.

Source: Business Insider

 

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