S&P Global Vice Chairman Daniel Yergin warned that global energy is in a "crisis," noting that "the market is very tight right now in terms of supply."
Speaking with "Mornings with Maria" from the World Economic Forum in Switzerland on Tuesday, Yergin noted that the energy market "was tight before the Ukrainian crisis" and now it is "being disrupted by the direction of flows."
The energy expert pointed out that in addition to crude oil, products like jet fuel, gasoline and diesel fuel are "further disrupted because Russia was part of the system and it’s been shut out."
Yergin provided the insight as gas prices have hit record highs for two straight weeks.
On Tuesday, the national average for a gallon of gas was $4.59, slightly higher than the day before and nearly 50 cents higher compared to the prior month, according to AAA.
Tighter supply and increased demand have pushed gas prices higher, according to the association.
Yergin warned on Tuesday that gas prices could go even higher as China reopens following COVID shutdowns.
Shanghai, a city of 25 million, has been under strict lockdown for weeks due to China’s "zero-COVID" policy.
Yergin argued that if China’s economy comes back strongly, "that’s going to really increase global oil demand and put more pressure on the market."
"And so that would actually increase the problems for the world economy and certainly would add to this inflationary problem that the world is struggling with right now," he added.
Earlier this month it was revealed that inflation cooled on an annual basis for the first time in months in April, but rose more than expected as supply chain constraints, the Russian war in Ukraine and strong consumer demand continued to keep consumer prices elevated.
The Labor Department said earlier this month that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries and rents, rose 8.3% in April from a year ago, below the 8.5% year-over-year surge recorded in March. Prices jumped 0.3% in the one-month period from March.
Those figures were both higher than the 8.1% headline figure and 0.2% monthly gain forecast by Refinitiv economists.
The slight slowdown in inflation last month came as energy prices declined 2.7%, driven by a 6.1% drop in gasoline (which had climbed a stunning 18.3% the prior month as a result of the Russia-Ukraine war).
|USO||UNITED STATES OIL FUND L.P.||77.41||+3.69||+5.01%|
|BNO||UNITED STS BRENT OIL FD LP UNIT||30.12||-0.70||-2.27%|
On Tuesday morning, oil prices increased with Brent crude futures for July rising about 80 cents to $114 a barrel and U.S. West Texas Intermediate crude futures for July delivery gaining 70 cents to about $110 a barrel.
Brent increased 0.7% on Monday while WTI settled nearly flat.
Yergin argued what governs energy prices is what’s going to happen to global gross domestic product (GDP), the broadest measure of goods and services produced across the economy.
"The one thing that would push down price would be a recession, which no one wants," he continued.