Global inflation is underway, and with it comes unprecedented challenges for households, businesses, investors, and governments alike.
The global inflation phenomenon is unique from other times of rising prices.
In the global inflation of today, prices have soared across all fuels compared with previous energy price shocks since 1979.
The annual average price of crude is forecasted at $93 per barrel equivalent in 2022, below the 2008 and 1979 price shocks, when crude oil averaged $127 and $119 per barrel, respectively.
“The global inflation phenomenon is unique from other times of rising prices”
WEALTH TRAINING COMPANY
The soaring energy price across all fuels distinguishes global inflation 2022 from past inflation energy shocks.
A piece in Visual Capitalist notes that price shocks were more or less isolated in the past, and many countries such as Germany and the Netherlands are looking to coal to make up for oil supply disruptions. Meanwhile, European natural gas prices have hit record highs.
The global inflation phenomenon is partly due to energy supply disruptions due to the war in Europe, the Ukrainian crisis, which has turned into an ongoing war.
Ukraine is an integral part of the natural gas transmission system of 38,550 kilometers of pipelines funneling energy from Russia to the north, east and central regions of the European continent.
So when Europe, a continent with more than two trillion USD Gross Domestic Product, experiences an energy supply shock that causes global shockwaves in the energy market.
“The global inflation phenomenon is partly due to energy supply disruptions due to the war in Europe, the Ukrainian crisis, which has turned into an ongoing war”
WEALTH TRAINING COMPANY
Global inflation today is driven by the collapse in supply from a major supplier, which is putting upward price pressure on energy substitutes
Realistically there is no alternative to abundant affordable Russian energy for Europe. Shipping liquid gas has its limitations. Logistically there are not enough ships to carry European energy needs over the sea.
Global energy inflation is due to failed policies. European diplomacy should have prevented an avoidable war on its continent with Russia, a major energy supplier.
Moreover, the anti-fossil fuel anti-nuclear energy agenda in Europe, and the shutting down of US pipelines worsened the energy supply shock.
Data from the World Bank, the above infographic charts energy shocks over the last half century and what this means for the global economy looking ahead.
“With higher input costs across fuel, chemicals, and fertilizer, agriculture commodity prices are forecasted to rise by 18% in 2022” – Wealth Training Company
The energy supply shock is also fueling global inflation in food
With higher input costs across fuel, chemicals, and fertilizer, agriculture commodity prices are forecasted to rise by 18% in 2022. Fertilizer prices alone could increase 70% in part due to Russia’s dominance of the global fertilizer market.
In 2022 global inflation is currently impacting 100% of advanced countries and 87% of emerging markets and developing economies, according to the World Bank
Global inflation is causing tighter monetary conditions in advanced economies, and a financial crisis in developing economies as the strong US dollar triggers a wave of bad loans in emerging markets.
There is also a correlation between global inflation and rising political instability and civil unrest
Food shortages and high food prices could put millions into acute food insecurity. Moreover, high fuel and food prices are correlated with mass protests, political violence, and riots.