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What a difference a year can make. During the depths of the coronavirus-fuelled stock market crash, crude oil prices traded and settled in negative territory, plunging to -$37.63 a barrel on April 20. Fast forward to September 2021, and crude oil prices are at their highest levels since 2014, near $77.50 per barrel. Analysts are predicting that crude oil could be worth as much as $100 per barrel this winter.

Meanwhile, natural gas prices are enjoying a strong run, with natural gas futures at their highest levels since 2014 and up more than 130% year-to-date.

Why Are Crude Oil and Natural Gas Prices So High?

There are a number of reasons why oil and gas are spiking and could remain in bullish territory for months. First, because of the economy recovery, disruption in the Gulf of Mexico from storms, and a global supply chain crunch, demand for global commodities is soaring, with prices for everything from natural gas to steel exploding. Crude oil prices have skyrocketed to their highest level in seven years while inventories are nearing a 10-year low.

Oil prices are also rebounding after the members of OPEC+ ministers ratified an existing pact to increase output to 400,000 barrel-a-day (B/D). Back in July, OPEC+ agreed to boost output by 400,000 bpd until at least April 2022. Analysts were expecting an 800,000 B/D boost. Because of the gradual supply hike, demand for crude is expected to out strip supply over the coming months.

Natural gas prices are also surging. The rise in natural gas prices, along with other fuel sources, is forcing countries to reduce factory production and could result in sky-high heating and electricity prices this winter.

In the U.S., natural gas future rose above $6 million British thermal units, nearly quadruple their pandemic lows. In places like Europe and Asia, liquified natural gas prices are going through the roof as countries look to secure enough fuel for the winter.

Because of high natural gas prices some utilities are switching their input fuel to oil.

By this winter, oil demand is projected to hit 500,000 B/D. If it’s a cold winter, oil demand could climb to 700,000 B/D to 800,000 B/D.

While high oil prices can make heating a home and running a factory expensive, it’s a boon for oil producers and ancillary businesses. It’s also great for the Canadian economy, which is the fourth-largest producer of oil in the world and sixth-largest producer of natural gas.

The production and delivery of oil and natural gas provided $105 billion to Canada’s GDP, or just under 10% of the country’s $1.8 trillion gross domestic product (GDP).

There is a downside, though. Oil at $100 per barrel contributes to inflation, which again, will hit customers hard. Case in point: because of soaring oil prices, gasoline prices in Toronto, Calgary, and much of the rest of Canada, are expected to hit record highs over the coming weeks. Overall, Canadian fuel prices are up more than $0.40 per litre than where they were a year ago.

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