Lower petroleum prices drove the PPI down

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The Norwegian PPI dropped 3.5 per cent from November to December. This was caused by lower prices on crude oil, natural gas and refined petroleum products.

Written by: Marius Andersen

The price of crude oil continued its decline in December and remained below 60 USD per barrel towards the end of December. From its peak in October, the price of North Sea oil (Brent Blend) measured in NOK fell about 24 per cent which has been important for the overall decline in the Norwegian Producer price index over the previous two months.

In addition, prices of natural gas and refined petroleum products also fell, the latter one down 8.8 per cent compared to November. Prices fell on most petroleum products, including several fuels.

Electricity prices on the other hand, increased 6.3 per cent. This increase can be seen together with a low level in Norwegian water reservoirs in parts of 2018. The producer prices index for electricity prices has not been at similar high levels since 2011 and the same holds for the monthly spot price at Nord Pool.

Figure 1. Price indices. 2015=100

PPI total Oil and gas extraction Refined petroleum products
jan.17 100.5 94.5 114.4
feb.17 103.3 99.3 122.9
mar.17 102.2 98.1 114
apr.17 100 90.8 112.6
mai.17 99.2 88.5 107
jun.17 96.7 83.8 101.5
jul.17 95.7 80.8 97.4
aug.17 96.1 81.4 100.8
sep.17 98.9 87 111.6
okt.17 101.3 95.2 118.7
nov.17 104.6 101.5 120.4
des.17 107.6 108.9 132.3
jan.18 110.9 116.1 132.9
feb.18 108.1 105 128.3
mar.18 108.7 106.9 123.9
apr.18 112.3 119.2 125.8
mai.18 113.6 121 138.2
jun.18 116.1 122.6 149.8
jul.18 117.3 123.9 149.9
aug.18 118 126.2 146
sep.18 119.7 131.6 149
okt.18 124.1 144.7 158.3
nov.18 120.2 131.4 156
des.18 115.9 119.3 142.2

Lower twelve-month change in the PPI

During periods of 2018 the twelve-month change in the PPI remained relatively high with more than 20 per cent twelve-month growth in the period June to October. In several industries which experienced growing prices in the first half of 2018, the price development reversed in the second half of 2018. This contributed to reduce the twelve-month change in the PPI which ended on 7.8 per cent in December.

  • Prices on crude oil and natural gas rose in the period February to October but have since decreased.
  • Prices on refined petroleum products rose in the period March to October but fell towards the end of the year.
  • Prices on basic metals rose through the first half of 2018 but have fallen continuously since June 2018.
  • Electricity prices on the other hand were almost 50 per cent higher compared to the same period in 2017, which was also the situation in large parts of 2018.

High annual growth caused by high prices on energy goods

The PPI went up 14.8 per cent from 2017 to 2018. This was to a large degree caused by sharp increases within prices on energy goods such as crude oil, natural gas, refined petroleum products and especially electricity throughout 2018. The annual growth was 32.3 per cent in extraction of crude oil and natural gas, whereas producer prices on electricity rose by 40 per cent from 2017 to 2018.

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