During the last four months of 2014, crude oil and petroleum product prices fell dramatically, and ended the year with the largest price drops of all major commodities in the S&P Goldman Sachs Commodity Index (GSCI), according to the US Energy Information Administration, based on Bloomberg.
In 2014, the energy component of the GSCI fell 43 percent from the start of the year.
Two benchmark crude oils, West Texas Intermediate (WTI) and Brent, make up about 67 percent of the weighting in the S&P GSCI energy index. Petroleum-based products (gasoline, heating oil, and gasoil) together comprise another 29 percent of the S&P GSCI energy index, and because prices for these products generally follow crude oil prices, the index tends to follow the major price movements in the crude oil market.
At the end of June, with elevated risk for supply disruptions in Iraq, the S&P GSCI energy index rose to its highest point of the year, reaching 10 percent above starting levels. In the second half of the year, higher, sustained increases in crude oil supply and lower expected global economic growth in 2014 and 2015 contributed to a rapid decline in crude oil prices, causing the prolonged decline in the index.
Natural gas accounts for the remaining 4 percent of the S&P GSCI energy index, and its price decline of 33 percent was the lowest price decline among energy commodities in the GSCI. Natural gas prices in February rose to levels not seen since 2008 as the United States experienced a very cold winter. Natural gas storage levels declined until the spring, which helped support prices through much of the first half of the year. Increased natural gas production in the spring and summer led to record injections, bringing storage levels closer to the five-year range and pushing prices lower.