Energy costs are poised to hit an all-time high of more than 13% of global gross domestic product this year as the price of keeping the world running surges.
Primary energy expenditure as a share of output is set to double from 2021’s level of just 6.5%, according to analysis by consultancy Thunder Said Energy. Soaring commodity costs are pushing up inflation and adding to bills for households and industry alike.
“Curtailing demand is the only short-term option to alleviate shortages,” wrote Rob West, a former Redburn analyst and the founder of Thunder Said Energy. “There are no good options here, only ‘less bad’ ones.”
Energy commodity costs have soared on supply concerns and the Ukraine war, with natural gas prices in Europe up more than 500% from this time last year. Russia’s lower oil production might also add to price inflation, as the International Energy Agency said on Wednesday that output could slump by about a quarter next month.
The 13% level for 2022 just matches the proportion of GDP in 1980, a period when oil prices were soaring.
West’s report assumes ranges of $250-300 a ton for coal, $125-150 a barrel for oil and $40-45 per thousand cubic feet for gas. “So this is not an ‘oil shock’ or a ‘gas shock’ but an ‘everything shock’,” he wrote.