Energy prices are likely to increase by 51% by 1st April, entailing the likely chances of a devastating negative economic impact or even a recession. Economists state that these higher prices could alarm consumers and may result in them decreasing their spending.
Compared to the most recent energy market cap of £1,277 which was only a 12% increase from 6th August 2021. The Energy price is estimated to be around £1995 by early April.
This is an uncommon coincidence where there are higher oil, gas and coal prices along with a major disruption in the supply chain industry. This implores the question if the economy could be foreseeing its economic downfall in the near future.
However, higher energy prices will definitely have economic effects. Particularly in countries like Europe where the price of natural gas has soared. Oil can be substituted for electricity production. Over 600,000 – 800,000 barrels of oil a day could be used as a substitute for natural gas for Europe and Asia. Consequently, causing oil to be consistently in higher demand and would be under pressure, causing the prices of oil to further rise.
Additionally, as there is a shortage of supply of coal, this would cause prices to rocket, creating a power supply crunch in China. As the inventory has faced a 10 year low in August, it caused an increase in demand for natural gas.
Inflation, which is measured by the CPI (Consumer Price Index), jumped to 3.2% in August. Which has by far been the highest level almost by a decade. Furthermore, the Bank said price changes caused by the rapid recovery from last year’s economic decline were driving up the barometer for living expenses. With an increase predicted to grow “above 4%” by late December. But, Inflation is then later envisioned to fall steadily towards the 2% target rate which is set by the government.
By Anshjeet Singh
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