We know that the fossil fuel industry is behind the climate impacts that wreck our planet. From droughts to tropical cyclones, the whole system designed for reaping benefits from the burning of hydrocarbons is responsible for the worst impacts of global heating. But fossil fuels affect people’s lives in many ways, and here is one more: fossil fuels drive inflation.
Just to be clear, and to get it out of the way: inflation is when prices of goods and services that households buy go up systematically and for a period of time. Usually, inflation is measured in a country and year to year, but it can also be considered month to month or quarter to quarter.
Fossil fuels drive inflation
Even though inflation measures prices paid by households, that doesn’t mean that prices of industrial supplies don’t matter, because if those rise, the price of the final products will usually rise too. So, for example, if the price of iron goes up, so does the price of steel, and so do the construction supplies prices, and so do housing prices. In a globalised economy, inflation is a chain reaction.
In this chain, there is one particular link that drives inflation more than others: the price of oil and gas. This happens because our economies are addicted to fossil fuels at every level: mobility, energy production, agriculture and goods production. When the prices of oil and gas go up, every other price tends to go up. Actually, high fossil fuel prices are historically inseparable from inflation and economic crises. Mark Zandi, chief economist at credit rating agency Moody’s, said in an article for Vox that “every recession since World War II has been preceded by a jump in oil prices”.
For example, immediately before the 2008 financial crisis, oil prices climbed up to 160 US dollars per barrel, almost double than the prices in 2007 and also almost double the average price for the next 4 years. The same happened between 1999 and 2000. And in the 1990s, right after oil prices skyrocketed by 135%, triggering another recession in the US. The list goes on an on.
Disentangling ourselves and our economies from the fossil fuel industry would protect our planet, and it would also protect our pockets.
Factors driving fossil fuel prices are many, and diverse. Most of the time, though, these come directly from producing countries, which raise and lower production, thus flooding or drying up the market. This is often used as a political tool, driving millions of people into despair.
But even though it’s the producing countries that fire the starting gun, they are not entirely to blame for inflation. In the end it’s the fossil fuel companies that set them up. It’s companies that set market prices – and do that for profit, with the ultimate goal of maintaining their obscene benefit margins at the expense of people’s suffering, and all while maintaining the human and planetary crisis unraveling.
Breaking the cycle
There is one solution: moving away from fossil fuels.
Granted, it’s not without problems: we need to do it fast, and we need to do it fairly. We may see the prices of some products, such as some metals, rise as demand increases, but nothing that has even remotely the same impact as fossil fuel prices have. And we will certainly see some try to stop or derail a fair transition. That is why we need to build new energy systems that put the people and the planet before profit and do not reproduce the unfair and dangerous practices of our current fossil-fueled economy.
By creating more decentralized, community-led, people-centered clean energy systems, we ensure that nobody can control the “inflation” switch for the economy and use it for their own benefit. We ensure resilient and thriving communities that don’t have to face humanitarian crises to satisfy the greed of the old fossil companies.
We are leaving the era of fossil fuels behind. By breaking free of coal, oil and gas, and replacing them by renewable energy sources, we protect our planet and our economy.