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The Inflation Factor: How Rising Food and Energy Prices Impact the Economy

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The Inflation Factor: How Rising Food and Energy Prices Impact the Economy Costs

How Rising Food and Energy Prices Impact the Economy

Since Russia’s invasion of Ukraine, the effects of energy supply disruptions are cascading across everything from food prices to electricity to consumer sentiment.

In response to soaring prices, many OECD countries are tapping into their strategic petroleum reserves. In fact, since March, the U.S. has sold a record one million barrels of oil per day from these reserves. This, among other factors, has led gasoline prices to fall more recently—yet deficits could follow into 2023, causing prices to increase.

With data from the World Bank, the above infographic charts energy shocks over the last half century and what this means for the global economy looking ahead.

Energy Price Shocks Since 1979

How does today’s energy price shock compare to previous spikes in real terms?

U.S.$/bbl EquivalentCrude OilNatural GasCoal
2022*$93$170$61
2008$127$100$46
1979$119$72$33

*2022 forecast

As the above table shows, the annual price of crude oil is forecasted to average $93 per barrel equivalent in 2022⁠. By comparison, during the 2008 and 1979 price shocks, crude oil averaged $127 and $119 per barrel, respectively.

What distinguishes the 2022 energy spike is that prices have soared across all fuels. Where price shocks were more or less isolated in the past, many countries such as Germany and the Netherlands are looking to coal to make up for oil supply disruptions. Meanwhile, European natural gas prices have hit record highs.

Food prices have also spiked. Driven by higher input costs across fuel, chemicals, and fertilizer, agriculture commodity prices are forecasted to rise 18% in 2022. Fertilizer prices alone could increase 70% in part due to Russia’s dominance of the global fertilizer market—exporting more than any country worldwide.

What are 3 Ripple Effects of Rising Energy Prices?

Oil feeds into nearly everything, from food to smartphones. In fact, the price of oil influences as much as 64% of food price movements.

How could energy and food shocks affect the world economy in the near future, and why is a lot riding on the price of oil?

1. Rising Global Inflation

In 2022, inflation became a global phenomenon—impacting 100% of advanced countries and 87% of emerging markets and developing economies analyzed by the World Bank.

Countries With Inflation Above Target201920202021Apr 2022
Emerging Markets and Developing Economies20%20%55%87%
Advanced Economies9%8%67%100%

Sample includes 31 emerging markets and developing economies and 12 advanced economies

By contrast, roughly two-thirds of advanced economies and just over half of emerging markets experienced inflation above target in 2021.

This has contributed to tighter monetary conditions. The table below shows how rising inflation in the U.S. has corresponded with interest rate hikes since the 1980s:

DateCore CPI at Beginning of CycleMagnitude of Rate Hikes
Over Course of Tightening Cycle
1979-819.3%9.0 p.p
1983-844.6%3.0 p.p
1986-893.6%4.0 p.p
1994-952.8%3.0 p.p
1999-002.0%1.75 p.p
2004-061.9%4.25 p.p.
2015-192.1%2.25 p.p
2022-236.4%2.75 p.p

2023 is an estimate based on market expectations of the level of the Fed Funds rate in mid-2023. U.S. Core CPI for 2023 based on latest data available.

In many cases, when the U.S. has rapidly tightened monetary policy in response to price pressures, emerging markets and developing economies have experienced financial crises amid higher borrowing costs.

2. Slower Global Growth

Energy price shocks could add greater headwinds to global growth prospects:

Global Growth Scenarios202120222023
Baseline5.7%2.9%3.0%
Including Fed tightening2.6%2.4%
Including Energy price spike2.2%1.6%
Including China COVID-192.1%1.5%

Together, price spikes, hawkish monetary policy, and COVID-19 lockdowns in China could negatively impact global growth.

3. Rising Food Insecurity and Social Unrest

Even before the energy price shock of 2022, global food insecurity was increasing due to COVID-19 and mounting inflationary pressures.

Number of People in Acute Food Insecurity20202021
Sub-Saharan Africa97M119M
Middle East and North Africa30M32M
South Asia16M29M
Latin America and the Caribbean12M13M

Sustained food shortages and high food prices could send millions into acute food insecurity.

In addition, high fuel and food prices are often correlated with mass protests, political violence, and riots. While Sri Lanka and Peru have already begun to see heightened riots, Turkey and Egypt are also at risk for social unrest as the cost of living accelerates and food insecurity worsens.

Global Challenges

Since World War II, oil price shocks have been a major constraint on economic growth. As the war in Ukraine continues, the outlook for today’s energy market is far from clear as a number of geopolitical factors could sway oil price movements and its corresponding effects.

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All the Metals We Mined in One Visualization

This infographic visualizes the 2.8 billion tonnes of metals mined in 2022.

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All the Metals We Mined in One Visualization

Metals are a big part of our daily lives, found in every building we enter and all devices we use.

Today, major industries that directly consume processed mineral materials contribute 14% of the United States economy.

The above infographic visualizes all 2.8 billion tonnes of metals mined in 2022 and highlights each metal’s largest end-use using data from the United States Geological Survey (USGS).

Iron Ore Dominance

Iron ore dominates the metals mining landscape, comprising 93% of the total mined. In 2022, 2.6 billion tonnes of iron ore were mined, containing about 1.6 billion tonnes of iron.

Metal/OreQuantity Mined in 2022 (tonnes)% of Total
Iron ore2,600,000,00093.3%
Industrial metals185,111,8356.6%
Technology and Precious Metals1,500,0080.05%
Total2,786,611,843100%

Percentages may not add up to 100 due to rounding.

Iron ores are found in various geologic environments, such as igneous, metamorphic, or sedimentary rocks, and can contain over 70% iron, with many falling in the 50-60% range.

Combined with other materials like coke and limestone, iron ore is primarily used in steel production. Today, almost all (98%) iron ore is dedicated to steelmaking.

The ore is typically mined in about 50 countries, but Australia, Brazil, China, and India are responsible for 75% of the production.

Because of its essential role in infrastructure development, iron ore is one of the most crucial materials underpinning urbanization and economic growth.

Industrial Metals

Industrial metals occupy the second position on our list, constituting 6.6% of all metals mined in 2022. These metals, including copper, aluminum, lead, and zinc, are employed in construction and industrial applications.

Aluminum constituted nearly 40% of industrial metal production in 2022. China was responsible for 56% of all aluminum produced.

Industrial Metals2022 Mine Production (tonnes)% of Total
Aluminum69,000,00037.3%
Chromium41,000,00022.1%
Copper22,000,00011.9%
Manganese20,000,00010.8%
Zinc13,000,0007.0%
Titanium (mineral concentrates)9,500,0005.1%
Lead4,500,0002.4%
Nickel3,300,0001.8%
Zirconium Minerals (Zircon)1,400,0000.8%
Magnesium1,000,0000.5%
Strontium340,0000.2%
Uranium49,3550.03%
Bismuth20,0000.01%
Mercury2,2000.00%
Beryllium2800.00%
Total185,111,835100%

In the second position is chromium, which plays a primary role in rendering stainless steel corrosion-resistant. South Africa led chromium production, accounting for 44% of the total mined last year.

Technology and Precious Metals

Despite representing less than 1% of all the metals mined, technology metals have been on the news over the last few years as countries and companies seek these materials to reduce carbon emissions and improve productivity.

Technology and Precious Metals2022 Mine Production (tonnes)% of Total
Tin310,00020.7%
Rare Earth Oxides300,00020.0%
Molybdenum250,00016.7%
Cobalt190,00012.7%
Lithium130,0008.7%
Vanadium100,0006.7%
Tungsten84,0005.6%
Niobium79,0005.3%
Silver26,0001.7%
Cadmium24,0001.6%
Gold3,1000.2%
Tantalum2,0000.1%
Indium9000.1%
Gallium5500.04%
Platinum Group Metals4000.03%
Rhenium580.004%
Total1,500,008100%

They include lithium and cobalt, used in electric vehicles and battery storage, and rare earths, used in magnets, metal alloys, and electronics. Many of them are considered critical for countries’ security due to their role in clean energy technologies and dependency on other nations to supply domestic demand.

However, despite increasing interest in these metals, they are still behind precious metals such as gold and silver regarding market size.

The gold market, for example, reached $196 billion in 2022, compared to $10.6 billion for the rare earths market.

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Visualizing Mining’s Footprint in British Columbia

Mining represents 7% of British Columbia’s GDP despite only accounting for 0.04% of the land use.

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Mining Footprint in British Columbia

Visualizing Mining’s Footprint in British Columbia

British Columbia is considered a global leader in the development of socially and environmentally responsible resources.

An estimated 54% of the province’s total land is protected, making it one of the world’s greenest mining hubs.

This graphic by the B.C. Regional Mining Alliance (BCRMA) details mining’s footprint in the province.

A Tier 1 Jurisdiction for Mining

British Columbia covers almost 95 million hectares (234 million acres), more than any European country except Russia, and more than any U.S. state except Alaska.

As the largest mining province in Canada, BC registered $18 billion in revenue from the industry in 2022.

British Columbia stands as Canada’s sole producer of molybdenum, which finds applications in metallurgy and chemistry. Additionally, B.C. is the country’s leader producer of copper and steelmaking coal, besides gold and silver.

B.C. mined material breakdown

At the heart of British Columbia’s mining industry lies the Golden Triangle, one of the hottest mineral exploration districts in the world.

More than 150 mines have operated in the area since prospectors first arrived at the end of the 19th century. The region alone is endowed with minerals worth more than $800 billion.

How Green is B.C. Mining

Mining represents 7% of the province’s Gross Domestic Product (GDP), despite only accounting for 0.04% of the land use. In comparison, farmland demands 3% of the land, bringing $2.1 billion (0.8%) per year.

Land Use in B.C.Revenue (2022, CAD $)
Mining 0.04%$18.0 billion
Oil & Gas 0.4%$9.5 billion
Infrastructure1%$25.0 billion
Farmland3%$2.1 billion
Forest62%$13.3 billion

Mining operations are also supported by a stable, transparent, and effective policy environment. The province ranked as the world’s least risky for mining in 2017 and 2018.

In addition, mineral exploration has received ample support from local Indigenous communities. Today, mining accounts for over two-thirds of all indigenous people employed in the extractives sector.

According to the International Energy Agency, up to six times more minerals and metals will be needed by 2040 to accelerate the energy transition.

In this scenario, British Columbia is well positioned to support the transition to a low-carbon future and make a significant contribution to climate action.

The BCRMA is a strategic partnership between indigenous groups, industry, and government representatives that aims to promote B.C.’s mining opportunities internationally.

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