Fluctuating oil and gas prices following the COVID-19 pandemic resulted in increased energy prices.
Both world crude oil and natural gas prices have hit historical highs in 2022 following Russia’s invasion of Ukraine.
Some US industries, including those related to energy generation, have been highly affected by growing energy prices.
In March 2020, the economy went into a recession due to the COVID-19 (coronavirus) pandemic. As a result, demand for oil and gas fell drastically as consumers were forced to stay home. However, as the economy recovered, energy prices increased significantly.
Furthermore, with the Ukraine and Russia conflicts, as well as rapid inflation, these prices spiraled out of control. In 2022, according to IBISWorld, the world price of crude oil is expected to reach $100.66 per barrel, while the world price of natural gas is anticipated to reach $28.44 per thousand cubic feet, both reaching historical highs.
These five industries are anticipated to be the most affected by rising energy prices over the past two years.
22111e Solar Power & 21111d Wind Power
With commodity prices, many consumers have noticed an increase in their utility bills, primarily electric and gas costs. As a result, consumers have continued to prefer renewable energy, with solar and wind power being the most popular options. Wind and solar power generation increased 12.4% and 28.6%, respectively, in 2021. Furthermore, in July 2022, wind and solar generation increased 25.8% and 30.8%, respectively, on a year-to-date basis.
Both industries have also benefited from the Inflation Reduction Act of 2022, which was signed into law on August 16, 2022. The act provides consumers with expanded and extended tax credits when switching to solar energy. Furthermore, the act provides a $10.0 billion investment tax credit to help build domestic wind turbines and solar panels, increasing demand from both operators.
22121 Natural Gas Distribution
Operators in the Natural Gas Distribution industry experienced significant revenue increases in 2021 amid rising gas prices, with revenue increasing 25.2% that year alone. Additionally, 90.5% of industry revenue is expected to be generated from the consumer market. As a result, operators were forced to raise the prices they charged to customers, which evidently led to consumers experiencing higher utility bills. However, despite these price increases, industry profit, measured as earnings before interest and taxes, has accounted for 8.3% of revenue in 2021 and 2022, down from double digits experienced in 2018 to 2020.
32411 Petroleum Refinery
Petroleum Refineries in the US have been significantly affected by the rising world price of crude oil over the past two years. Refineries purchase crude oil to refine into petroleum-based products, which are then sold for distribution. Amid rising prices, operators in this industry can pass these costs on to buyers, resulting in revenue increasing an estimated 26.7% and 21.3%, respectively, in 2021 and 2022. However, despite a significant increase in demand, operators have experienced constrained profitability and rising purchase costs due to input cost volatility.
21111 Oil Drilling & Gas Extraction
Operators in the Oil Drilling and Gas Extraction industry have exhibited significant changes amid rising commodity prices. IBISWorld estimates that industry revenue will increase 67.3% and 80.2%, respectively, in 2021 and 2022. However, due to increasing demand, many smaller companies have entered the industry, intensifying internal competition. As a result, despite growing revenue, operators in this industry have experienced constrained profitability and increasing purchase costs as new entrants seek to take advantage of rising commodity prices.
Source from Ibisworld
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