While the global economic growth of -3.3% in 2020 was according to the World Bank the lowest since the end of World War II, the global economic growth of 5.5% expected for 2021 tends towards the other extreme on that diagram. The global economic growth was last more rapid in 1972 and 1973 when it was similarly to today driven by a rapid increase in the prices of energy carriers.
The small and open Estonian economy raced at an even faster pace in 2021. According to Statistics Estonia, Estonia’s gross domestic product (GDP) made the fastest leap in the past 15 years: 8.3% (2020: -3.0%). As the growth of the average gross salary of 6.9% (2020: 2.9%) remained near the average level of recent years, it was for the first time in 10 years lower than the GDP growth. The salary increase is expected to continue to accelerate in 2022, but economic growth forecasts are tentative due to the war started by Russia in Ukraine.
VKG’s financial results are influenced the most by what is happening on the global oil market. The rapid growth in the overall economic activity also restored the demand for fuels, but as OPEC+ increased the supply of oil carefully and it takes time for the US shale oil producers to recover from the crisis, the prices of fuels mainly moved up in 2021 on the backdrop of limited supply and growing demand. The year started with the Brent price of 51 $/bbl, reaching the peak by the end of October at 86 $/bbl. News of the spread of the new and particularly contagious Omicron strain brought the price of crude oil back to around 70 $/bbl by the beginning of December, but as a result of a leap made in the last week of the year, Brent ended 2021 at the level of 78 $/bbl. The average price of the year was 71 $/bbl, which was 65% higher than in the previous year of the crisis.
VKG sells most of the produced oils on the basis of the price of fuel oil with 1% sulphur content. Compared to the Brent crude oil, the 1% fuel oil market is less liquid and the price of fuel oil may move differently from Brent, depending on the ratio between supply and demand. As VKG’s expenses are denominated in euros, the company’s results are also influence by the US dollar rate. Thus, the Group’s results are best characterised by the following fuel oil price curve.