Why Are Energy Prices A Problem For Inflation?

Energy prices, or how much we pay for things like electricity and gas, can significantly impact our daily lives and the economy. After all, energy is the “fuel” that keeps the global economy running.

Like a car needs petrol, businesses and households need energy to function. So when energy prices go up, it can make everything more expensive.

Impact on the Economy

On a personal level, high energy prices can make it harder to pay bills and can eat into your disposable income. This means we have less money to spend on things we want or need, like food or buying a new pair of shoes.

But this isn’t just limited to energy bills. Almost every business you can think of will have energy costs baked into the price of the goods and services we buy. So, not only are your energy bills increasing but, likely, the cost of things you’re buying will also increase in general.

That means inflation caused by rising energy prices can become quite broad throughout the economy, and it may be hard for consumers to find substitutes for the items they buy.

If people have less money to spend, that could result in less consumer spending and a slowing economy.