Many parts of the economy are starting to bounce back from the pandemic, including the energy sector. As oil and gas consumption rises, crude prices are also going up – they’ve reached record highs in the last three weeks.
Matt Smith is director of commodity research at ClipperData. He told Texas Standard that gasoline demand has increased significantly, as vacationers take to the roadways this summer. But demand isn’t yet back to pre-pandemic levels.
“It’s the same for the jet fuel side of things,” he said. “That’s lagging as well, but also showing improvements.”
On Friday, the Transportation Safety Administration, or TSA, said it counted 2 million daily passengers at U.S. airports for the first time since before the pandemic.
During the pandemic, U.S. oil production dropped, as companies pulled back on investment. Smith says the current price upswing is driven by the return of consumer demand.
The pandemic has affected other products related to energy, including used cars. More people want to buy cars, either to become more mobile than they have been, or as an alternative to public transportation. But used car prices are up 20% over last quarter, Smith says.
“It’s a similar thing on the car rental side of things, too,” Smith said. “There’s low inventory, and rising demand.”
During the pandemic, car rental companies sold off half of their cars to generate cash they needed to weather tough economic times.
Besides the pandemic, greater interest in renewable energy sources has led energy companies to curtail investment in new fossil fuel projects.
“There’s so much shareholder pressure on these companies to pivot towards being more focused on climate change, more focused on renewable energy,” Smith said.
He says reduced investment will likely result in higher energy prices until green energy achieves the critical mass needed to bring costs down.