Prices on crude oil and natural gas had a combined increase of nearly 8 per cent in May, with the largest increase on natural gas. In Europe as a whole, May saw colder weather than normal. Since gas is often used in heating in Europe, there was significant increase in demand, which resulted in higher prices on export of Norwegian gas. Liquid gas is also commonly used in China and generally in Asia, which brings the gas prices up on the world market.
Cold May contributed to higher prices on electricity
The index for went up 7 per cent from April to May, a somewhat uncommon price increase this time of year. In May, the temperatures in Norway were low, and this gave less meltwater to fill up magazines, according to the weekly reports (in Norwegian) from the Norwegian Water Resources and Energy Directorate (NVE). In addition, they mention rising prices on CO2 quotas and the gas price increase for Norway’s electricity trading partners, as contributing factors to the price increase.
There are also reports of less wind power generated in Europe in some weeks of May. This led to higher demand, which again increased demand and thus prices on Norwegian electricity.
It was the energy goods in general that contributed to the rise in the producer price index in May. had a more modest change from April to May and ended up at an increase of 0.8 percent.
Continued price rise on basic metals
The metal markets have been very unsteady lately, with continuing price increases and longer delivery times. In May, the prices in the metal industry rose by 4.3 per cent. From September 2020 to May 2021, the increase has been about 18 per cent.
The reason for the rising prices is the high demand from manufacturing, especially the auto industry and appliances, where the activity started to rise last year’s fall. This is also shown in the PPI indices both for non-ferrous metals and for iron and steel. The high demand on basic metals brings one large problem: The sudden rise in demand was larger than expected. The steelworks were not prepared for the sudden rise in demand and the sudden upscaling of production, which is both costly and time-consuming.
Wood and wood products also continued its price increase in May, up 1.9 per cent.
The industry which dampened the PPI total the most was the refined petroleum product industry, with a decrease in prices of about 4 per cent in May.