According to experts at Oxford Economics, in 2022, European gas will cost more than expected.
The current surge in gas prices is posing risks of higher inflation in European countries. Tensions between Russia and Ukraine are also adding fuel to the fire. Against this background, Oxford Economics upwardly revised its forecasts for energy prices in 2022. They suppose that oil prices will remain high during the whole year ($86 per barrel). Earlier, analysts foresaw the price of Brent crude at $73 per barrel.
The situation with natural gas is almost the same. Oxford Economics had expected a decline in the price of liquefied natural gas in the second quarter of 2022. Now, they think that LNG will cost more than in 2021.
Thus, strategists at Oxford Economics updated forecasts for both gas and oil prices by 53% and 19% respectively. These estimates have affected inflation expectations in the eurozone. The updated forecasts assume inflation at an average level of 3.9% in 2022, compared with the previous estimate of 2.5%.
In 2022, the cost of gas may gradually drop to $20-25 per MMBtu from $30 per MMBtu. In 2023, the price may slide to $10 per MMBtu.
Oxford Economics believes that the eurozone consumer price growth will slacken by 2023. A bit later, inflation may decline to 2% amid higher energy costs that is the main driver of consumer prices. Meanwhile, members of the European Commission suppose that in the second quarter of 2022, gas may become cheaper, though slightly exceeding the previous figures. However, by spring 2023, the situation is likely to improve.
