Inflation in the European Union reached 8.1% as of May 2022, according to a data released last week by Eurostat, with the price of energy alone increasing nearly 40% year-over-year. Meanwhile, in the United States, the Consumer Price Index (CPI) increased 8.6% during the same time period, with energy products rising 35% in price.
Although both the United States and Europe began seeing higher inflation after COVID and the lockdown-induced recession, according to data from the World Bank, the problem has since been exacerbated due to the Russian invasion of Ukraine.
Russia is the world’s third largest oil producer and the overall largest exporter of oil to global markets, according to the International Energy Agency. Although oil continues to be exported from Baltic and Black Sea ports, trading houses are purchasing and storing the oil in Europe, where it could eventually be resold in avoidance of international sanctions, a March report from the Federal Reserve Bank of Dallas explained.
“The surge in global fuel, electricity, residential natural gas and food prices, as well as the supply-chain disruptions caused directly by the invasion of Ukraine and indirectly by the sanctions against Russia, will sustain inflationary pressures in 2022,” the Dallas analysts said. “If the bulk of Russian energy exports is off the market for the remainder of 2022, a global economic downturn seems unavoidable.”
In Germany — which imported over one-third of its oil from Russia in 2021 — producer prices surged at their highest clip since data collection began in 1949. In the United Kingdom — where Russian oil accounts for 8% of demand — inflation edged up to 9.1%, according to the nation’s Office for National Statistics.
British Conservation Alliance head of research Connor Tomlinson told The Daily Wire that inflation in the United Kingdom is worsened by a “catastrophic concoction of high tax government policies, supply-side procurement issues, and quantitative easing.”
Tomlinson noted that the nation has “price caps on energy — introduced by a supposedly free market Conservative government — which has produced an arms race between consumers already strapped for cash, suppliers who are producing at a net loss while the wholesale cost of gas rises, and a government bureaucratic engine which moves too slowly to adjust the cap in accordance with market activity.” Because the price caps were raised in April, energy bills are expected to increase by £693, or $850, per household.
Meanwhile, the United Kingdom became a net energy importer in 2005 after abandoning natural gas production in the North Sea, according to Tomlinson. Sanctions placed on Russia have also limited the nation’s access to metals necessary for electric vehicle adoption, as well as the decarbonization of energy grids.
“We’re also seeing the return of Marxist unions holding the country to ransom, with national rail union strikes across the country canceling train and tube services everywhere, and tripling the prices of other means of transport as a result,” Tomlinson added. “Some of us are de facto locked down, working from home, because travel strikes and prices make work impossible in offices.”
Earlier this month, the World Bank slashed its 2022 global economic growth forecast from 4.1% to 2.9%, largely due to elevated price levels.
“Global inflation is expected to moderate next year but it will likely remain above inflation targets in many economies,” the international financial institution said. “If inflation remains elevated, a repeat of the resolution of the earlier stagflation episode could translate into a sharp global downturn along with financial crises in some emerging market and developing economies.”