Unusual Events in 2022 Create Issues for Global Economy in 2023

A global pandemic, a war in Europe, climate change mandates, government policies restricting oil supply, and record high energy prices have thrown a cloud over future energy supplies, which has resulted in rising inflation and the potential for a worldwide recession.

2022 was a year filled with news-making events. But many of the events of 2022 began in 2020 when governments around the world mandated lockdowns that deterred economic activity because of Covid-19. The decline in economic activity caused the oil and natural gas industry to reduce activity. Workers were laid off, exploration and production activity was reduced, and oil prices dropped to $15 per barrel.

As 2021 rolled around, government lockdowns began to ease. Businesses re-opened, transportation needs rose, and demand for petroleum products increased. The drilling count, which had dropped to 250, doubled to more than 500. Production began to rise, but personnel and equipment problems persist today.

By year-end, Russia assembled a huge arsenal of the military on the Ukraine border. Russia, one of the largest oil and natural gas producing countries, supplied an estimated 40 percent of the natural gas consumed in the European Union and 30 percent of its crude oil. Additionally, Russia exported some 7 million barrels of oil per day in 2021 worldwide.

A few months later Russian troops invaded Ukraine. The governments of the United States, Western Europe and others protested the aggression and issued sanctions against Russian petroleum exports. Demand for petroleum products had risen much faster than supplies and prices were on the rise, too. The International Energy Agency (IEA) estimated a 900,000 barrels per day shortage of crude oil.

Crude oil futures prices in the U.S. peaked in June at $122 per barrel, and gasoline prices followed averaging a record high of $5.107 per gallon for retail across the U.S., according to the Energy Information Administration (EIA). On Jan. 1, oil sold for $76 compared to $79 on Dec. 28, and the gasoline retail price on Jan. 1 was $3.381 compared to $3.203 today.

Policymakers in Washington used the rising prices to implement anti-fossil fuel laws, regulations and programs.

The American Energy Alliance issued a report listing 125 ways President Biden’s administration has issued policies restricting oil production in the U.S. since taking office in January 2021. The policies included canceling the Keystone XL pipeline that stretched from Canada to the Gulf Coast of Texas, implementing new environmental standards for the oil and gas industry, delaying federal lease bids, and verbally threatening American oil and gas companies with investigations into “price gouging.”

The Biden administration searched for a quick fix to solve the huge political problem of rising inflation and gasoline prices. He twice announced the release of oil from the Strategic Petroleum Reserve – the first of 50 million barrels and another 30 million barrels. President Biden decided the situation needed more oil, and released roughly an additional 180 million barrels in an effort to drive down oil and gasoline prices before election day in November.

President Biden publicly criticized American oil producers, refiners and even service station owners while asking foreign countries that compose the membership of OPEC to increase production but they later agreed to cut production quotas by 2 million barrels per day.

The events of 2022 will continue to impact future economic and political events as the war continues in Europe, China tries to cope with Covid-19, and economies around the globe try to deal with inflation and a recession.

Alex Mills is the former President of the Texas Alliance of Energy Producers.