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Americans and Europeans may want to get off carbon-emitting fossil fuels, but they’re still hooked on the stuff and getting off it is going to be painful and expensive.
Europe is becoming the focus of an all-out energy crunch causing blackouts and factory stoppages there – but that’s also affecting prices in the US. One example: The price of natural gas, which heats half of US homes, is up 180%.
Oil prices have skyrocketed too, thanks to long-depleted production by OPEC and the US. Analysts expect that gasoline prices will continue to rise.
Inflation fears hit stocks Tuesday. Federal Reserve Chairman Jerome Powell told lawmakers that prices will remain elevated for months before tapering. His predecessor, Janet Yellen, who is currently the treasury secretary, also set a date – October 18 – for when the US government will run out of money unless lawmakers raise the country’s debt ceiling. Read more about the markets and the looming drama around whether the US will cover its debt.
Economists have downgraded their outlook for the US economy, although they still predict growth.
What is happening? There are specific and complicated reasons why prices are up.
CNN’s Julia Horowitz lays out how multiple factors converged to create Europe’s energy crisis:
- A cold spring depleted natural gas inventories.
- Rebuilding supplies has been tough, thanks to an unexpected jump in demand as the economy bounces back from Covid-19.
- There’s a growing appetite for liquified natural gas in China.
- Russia is also supplying less natural gas to the market than before the pandemic.
- Meanwhile, other sources of power have been less readily available, with calm summer weather quieting North Sea wind farms.
- Countries are ditching coal as pressure builds to tackle the climate crisis.
- Germany is also phasing out nuclear power by 2022.
Countries like Spain and France are stepping in to subsidize energy bills.
No wonder American diplomats are getting louder in their frustrations with Russia’s plan to mainline into Europe with a new pipeline that will make Russia the continent’s natural gas pusher.
This is the path from coal-fired plants to your iPhone. CNN’s Jill Disis writes about blackouts in China.
“The world’s biggest polluter is trying to meet a pledge that its carbon emissions will peak before 2030. That requires its provinces to use less fossil fuel for each unit of economic output, for example by burning less coal to generate power. At the same time, demand for Chinese-made goods has surged as the global economy emerges from the pandemic. The result: not enough power to go round.”
Shortage of drivers could shutter gas stations. In the UK, where Prime Minister Boris Johnson was proud to remove his country from the EU via his Brexit plan, they’re now offering emergency visas to foreign truck drivers to keep gas stations open.
They might have to call out the military to step in and drive trucks to fill up dried-out service stations.
Don’t sneer at them for that, though. In the US, Massachusetts mobilized its National Guard to help get kids to school because there aren’t enough bus drivers, either.
What happened to the drivers? CNN’s Liz Stark writes:
Data from the Bureau of Labor Statistics shows the number of drivers plunged at the beginning of the pandemic. Between March and April 2020, the trucking industry lost more than 88,000 jobs, and transit and ground passenger transportation lost more than 185,000 in that month alone.
The driver shortage is among the reasons Costco is again limiting toilet paper purchases.
When CNN wrote in May about the beginnings of the truck driver shortage, there was a suggestion that higher wages could actually be having the opposite effect on drivers, who use the pay to cut down on driving hours and get a higher quality of life out of a grueling career that keeps them away from home.
The auto industry is worse off than we thought. Meanwhile, carmakers worldwide are still being frustrated by the microchip shortage. Add it onto a number of other shortages.
Chips “are just one of a multitude of extraordinary disruptions the industry is facing – including everything from resin and steel shortages to labor shortages,” Mark Wakefield, global co-leader of the automotive and industrial practice at industry consultant AlixPartners, told CNN Business’ Chris Isidore. “There’s no room for error for automakers and suppliers right now.”
Millions of cars short. The shortage of parts will lead automakers to build 7.7 million fewer vehicles globally than they otherwise would have, according to AlixPartners.
That’s a huge increase over the 3.9 million vehicle shortfall forecast in May.
When will there be microchips? Isidore writes: “Microchip supply had been widely expected to bottom out in the second quarter of this year, and then start to improve. But a surge in Covid-19 cases caused a new round of shortages, as chip plants were forced to temporarily shut down in some hard-hit countries, such as Malaysia.”
When will prices go down? Dana Peterson, the chief economist at The Conference Board, writes that this bout of inflation could last for a year.
“Yes, the intensity of price hikes slowed over the summer, but the Delta variant and its disruptions risk another bout of US consumer price spikes in the fall. Even if they do not occur, consumers are unlikely to see lower prices this year thanks to computer chip shortages, rising wage pressures as businesses reopen and the return of rent hikes,” she writes.