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Energy price inflation to see sharp rise in H12021

Oil&Gas Materials 15 January 2021 14:48
Energy price inflation to see sharp rise in H12021

BAKU, Azerbaijan, Jan.15

By Leman Zeynalova – Trend:

A sharp rise is expected in energy price inflation in the first half of 2021, Trend reports citing UK-based Capital Economics research and consulting company.

“Even if oil prices hover around $55pb in the coming months, base effects will ensure a jump in energy price inflation on the anniversary of last April’s collapse in oil prices. We expect that energy price inflation will go from knocking around 0.6%-pts off the OECD headline rate in November to contributing around +1.0%-pt in April. That would push inflation up by about 1.5%-pts to above 2.5 percent. After this purely arithmetic acceleration, the contribution of energy price inflation will drop back only slightly in the second half of 2021, as the Brent oil price continues to rise towards $60pb by year-end,” reads the report released by Capital Economics.

Since the start of the pandemic, any upward pressure on inflation from COVID-related supply constraints has been more than offset by the disinflationary impact of subdued demand, the plunge in oil prices in March and April 2020 and, in some cases, temporary VAT cuts, the company said.

The headline OECD inflation rate fell from 2.2 percent in December 2019 to below 1 percent in May 2020 and was still only 1.2 percent in November.

All told, the company expects some one-off factors to push up OECD headline inflation from 1.2 percent in November to a peak of 2.8 percent in May this year. “The big picture, though, is that outside the US core price pressures are set to remain subdued. And, in any case, we expect policymakers everywhere to be more tolerant of higher inflation. Therefore, central banks will look through any rise in headline inflation rates.”

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Follow the author on Twitter: @Lyaman_Zeyn

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