File photo: An employee turns a valve on the Nahr Bin Omar natural gas field, north of the port of Basra in southern Iraq. AFP

Since August, world prices for oil, gas, electricity and coal have risen dramatically to reach their highest levels in decades due to a number of factors; including the rebound in global economic growth after the significant slowdown it experienced due to the COVID-19 crisis. This has increased the demand for energy sources, especially petroleum and fuels in general.

Additionally, the increases came in the wake of a global shift to clean energy and green economies to serve an international commitment to contain climate change and its associated impacts through 2030.

According to Moody’s, increases in global energy prices are the main reason for the current surge in global inflation rates.

“The simultaneous surge in the prices of energy-related raw materials in all geographies is the result of demand exceeding existing supply in a context of rapid rebound in closed economies. It also reflects a long-term decline in investment in the production of all types of fossil fuels, hampering the industry’s ability to respond quickly to surges in demand, ”Moody’s explained.

Despite its optimistic expectations, Moody’s stressed that companies will need to reverse the downward trend in investment to bring down oil and natural gas prices over the medium term.

“A strong rebound in economic demand pushed all energy prices up, while varying price volatility revealed differences in market structures, as well as a number of short-lived disruptions in the market. supply and demand. “

He also said that although oil prices have risen rapidly, the oil market retains some ability to meet the rapid recovery in demand in 2021, but relies on OPEC + producers to continue to reverse cuts. production set up in 2020 in order to balance the market in a context of sharp drop in demand.

“Outside of OPEC, producers continue to prioritize yields and strengthen balance sheets over production growth. As the OPEC + group rolls back previous production cuts, it is reducing its spare production capacity and ability to ease prices in 2022, potentially risking further increases in oil prices amid rising demand, ”Moody’s explained.

“The increase in oil production in 2022 outside of OPEC + countries is expected to accelerate so that the market will rebalance without creating further increases in oil prices.”

The International Monetary Fund also expects global energy prices to decline by 2022 when demand for heat decreases and supplies recover.

However, the IMF has warned that if energy prices remain high, global growth could be crippled.

In response to rising natural gas prices, Egypt announced on Sunday that it plans to subject natural gas to an automatic pricing system that sets prices based on supply and demand, which is the same system that Egypt adopts for fuel pricing.

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