Oil prices notched up their biggest annual gain in 12 years as the rebound in the global economy sparked a surge in fuel demand.
Brent crude was trading above $78 as 2021 ended, some 51 per cent higher than it started the year.
That was the largest increase in the oil price since 2009 when it jumped 70 per cent as the world recovered from the financial crisis.
Crude is more than four times higher than the low of $18 a barrel hit during the pandemic in April 2020 when lockdown and border closures hammered demand. But it is down from October’s three-year high of $86.70.
The rise in the price of oil has hit motorists in the pocket by driving up the cost of a tank of fuel.
Unleaded petrol hit a record high over 147p a litre in November while diesel topped 151p. The average price of petrol is now 145p while diesel is 149p.
The increasing cost of filling up coupled with soaring energy bills from natural gas shortages has created a severe cost of living squeeze for UK households.
The fuel bill also looks set to grow, with analysts at Goldman Sachs predicting oil could hit $100 a barrel by 2023 if supply fails to keep pace with growing demand. Petrol fell to a little over £1 a litre in 2020 as the pandemic wreaked havoc on the global economy.
While Brent crude fell below $20 a barrel, another major oil benchmark, West Texas Intermediate, at one stage dropped into negative territory for the first time ever, trading at minus $40 a barrel.
That meant oil producers were paying buyers to take it off their hands. This was because storage facilities in the US were almost full – including at the main hub in Cushing, Oklahoma – forcing producers to offer buyers oil as well as cash to take delivery.
Since then it has rebounded to nearly $76. Oil prices climbed steadily over 2021 as the relaxation of lockdown restrictions and the restart of travel caused demand for energy to rebound despite several waves of new Covid-19 infections.
‘We’ve had Delta and Omicron and all manner of lockdowns and travel restrictions, but demand for oil has remained relatively firm,’ Craig James, chief economist at Australian brokerage firm Commsec, said.
‘You can attribute that to the effects of stimulus supporting demand and restrictions on supply,’ he added.
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