Years of Quantatative Easing and low interest rates, plus the illogical lockdowns, have combined to produce high inflation, unaffordable energy prices and high(er) interest rates. Many people are bemused, they are dazed and confused, they wander around like lost souls waiting for all this to end, and for things to “get back to normal”. Folks, the reality is, this ain’t going to end, this is the new normal, so get used to it.
For years now, western Governments have been at war with fossil fuels and the companies that produce them. Subsidies for renewables have increased the price of gas, coal, and even nuclear power. To fight the pandemic, Governments around the world went into “lockdown”. Demand was cut significantly and energy companies cut back on production and investment. Now the lockdowns are over, the fossil fuel energy producers are not going to increase production. Why should they? Any money they spend is dead money, because Governments have vowed to kill their businesses in the not too distant future.
Business works on supply and demand. The demand for energy has risen dramatically, but supply has not increased to meet it. Profits, however, have increased for the fossil fuel energy producers. Centrica, for example has increased profits by 1,100%. BP and Shell have seen all time record profits of up to ten times the usual rate. It is a bonanza for these companies. You think they’re going to spoil that by increasing production? No chance! And it is the high price of wholesale energy that’s driving inflation. In UK, the inflation rate is 11.8% (RPI) and, in October, under the energy price cap rules, unit prices of gas and electricity will increase by 77%. But, wait, irt gets better, Ofgem, the UK energy regulator has changed the rules, so there’ll be yet another increase in January (the middle of winter). The energy generators are rubbing their hands in glee and their shareholders are ordering cases of champagne.
And, food prices will continue rising, simply because Russia and China are now well outside of the “rules based order”. Russia, due to extreme sanctions has had to find new markets for gas, oil, coal, wheat, corn and other commodities that are abundant in that country. New markets have opened up in China, Iran, India, Africa and South America. US hegemony is fading fast, so the USA seeks to provoke China and Russia into open conflict with the west. That strategy is simply creating a strong alliance of countries with abundant commodities and, unlike the west, low levels of debt. So, how, exactly are prices going to fall when the west has made enemies of energy companies and countries whose commodities we desperately need? It’s pretty obvious to see that prices won’t be falling anytime soon, if ever.
The only thing to do then, is to get used to it. Start making meals from scratch, go out less, use less gas and electricity. Maybe get a woodburner and a few solar panels. Get some leisure batteries and a wind turbine. Ever get the feeling your Government has abandoned you? I read an article on a website a few weeks ago which stated that QE was life support for the economy. The Fed increasing interest rates may be seen as pulling the plug on the life support. A lot of people are going to be a lot worse off financially, but for the poorer in society life will be much harder, if not impossible.