At the beginning of 2021, the price of a barrel of Brent Crude oil -- typically used as the benchmark for the world's oil prices -- came in at $50. Over the course of the year, as pandemic restrictions loosened, the global demand for oil quickly began to outpace production. Prices increased dramatically and by December 31, the market closed at $77.78 per barrel.

In his article for The Atlantic, Robinson Meyer states that the increase in oil prices over the course of 2021 is just the beginning. And that two major mismatches in the energy system will result in inflation of energy prices across the board. The mismatches are:

1. Demand exceeds supply: According to the International Energy Agency (IEA), the world's investment in oil and gas supply is actually in line with the goal to limit warming to under 1.5 degrees C. However, demand is in line with a temperature rise over 1.5 degrees as companies and governments worldwide continue to funnel money into mechanisms that use fossil fuels, such as power plants and transportation.

2. Fossil fuels are phasing out, but clean energy lags behind: Countries and companies have indicated their intention to phase out fossil fuel investments, but clean energy must triple in order to fully replace the global energy supply.

Why This Matters

These mismatches mean consumers can expect to see short-term increases in energy costs, and if effective climate policy is not passed, the increase will continue in the long term as well.

An increase in fossil fuel prices highlights what we already know -- dirty energy is decreasing in viability. Yet from a policy standpoint, increased oil prices proved to be a major roadblock when it came to passing many of President Biden's pro-climate clean energy plans, including those in the Build Back Better bill.

The Big Picture

According to Ben Cahill, a senior fellow at the Center for Strategic and International Studies, the decrease in global oil and gas investment can be credited to both the COVID-19 pandemic and the 2014 oil price crash, rather than to climate concerns. Without pro-climate policy, we can expect to see investment increase again in the coming years.

To counteract the supply-demand mismatches, the IEA says the world must adopt both technological and behavioral change, including investing in clean energy and ensuring that demand aligns with clean energy goals. In Meyer’s words, "We are living in a world where those investments are happening -- we're already doing a lot to reach net zero. It's just not nearly enough."