Soaring energy prices threaten to dent US economic recovery
Despite many challenges, the US economy remains resilient. However, now, it is again preparing to overcome an obstacle along the path to recovery. The world's largest economy, like the rest of the world, is facing rising energy prices that threaten to delay its economic rebound.
The energy market has rallied significantly over the last few months. Oil and gas prices have reached seven-year highs. Thus, oil prices have added 64% in a year, while gas prices have doubled in just six months. Petroleum products are also gaining in value: gasoline prices have risen by $1-$3 per gallon (one US gallon equals 3.78 liters), while heating oil prices have soared by 68% this year. A surge in energy prices is driven by strong demand that is recovering from the coronavirus pandemic. Against this background, factories have to ramp up production, which requires energy. At the same time, energy supplies are limited.
According to experts, the current situation may lead to higher inflation, lower consumer spending, and slower economic recovery. Andreas Steno Larsen, an analyst at Finland's Nordea Bank ABP, believes that the US economy will grow by 1.5% in 2022 compared to the previous forecast of a 3.5% increase. He predicts that in 2022, oil and gas prices in the United States could rise by 40%.
Europe is also experiencing an energy crisis. Gas prices in the region have more than tripled in 2021. Besides, the UK that left the European Union is on the brink of an energy disaster. Thus, soaring gas prices, poor performance of wind farms, and a halted power link between France and Britain have put the country's economy at risk.