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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 Russiaโ€™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 recentlyโ€”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 todayโ€™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 2022โ . 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 Russiaโ€™s dominance of the global fertilizer marketโ€”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 phenomenonโ€”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 todayโ€™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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Real Assets

Charted: If Gold Was Shared Equally, How Much Would You Get?

There are 244,000 metric tons of known gold reserves. And 8 billion people. Here’s the answer to: what if gold was shared equally?

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This chart examines a hypothetical question of how much gold there is in the entire world for every person by dividing all known reserves by current global population.

Charted: If Gold Was Shared Equally, How Much Would You Get?

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Desired for millennia because of its shine and rarity, gold is still the safe haven asset (with fairly decent returns) in times of uncertainty.

This chart examines a hypothetical question of how much gold every person in the world would get if all discovered gold was shared equally.

Data for this graphic is sourced from the U.S. Geological Survey and from the UNโ€™s World Population Prospects 2024.

Thereโ€™s Not a Lot of Gold for 8 Billion People

Turns out, there really isnโ€™t a lot of gold in the world.

To date, only 244,000 metric tons of gold have ever been discovered. This includes historical production and current known discoveries.

That works out to about 30 grams (about one troy ounce), or six gold rings, for every single human being on the planet.

CategoriesFigures
Gold Discovered
(Metric Tons)
244,000
World Population8,161,972,572
Gold per Person
(Metric Tons)
0.00002989
Gold per
Person (Grams)
29.89 (or one ounce)

Of course, jewelry isn’t the only use of gold (though it does account for the largest share of above-ground use).

Central banks have quite a bit in their reserves, with the U.S. holding the most at roughly 8,000 tonnes.

At sixth place China (2,200 tonnes) has been steadily increasing its reserves in the past year, in a bid to diversify foreign exchange reserves away from the U.S. Treasury bonds.

Largest Gold Producers

And then thereโ€™s all the gold beneath the ground, spread out in massive mines across the world. Of them, Australia is home to two in the top 10, and is also the second-largest producer.

Whoโ€™s the largest producer? Thatโ€™s Chinaโ€”even though it doesnโ€™t have any large mines on the same scale as those found in the U.S. and Australia. Instead it has numerous smaller ones, and coupled with efficient smelting infrastructure, ends up producing more volume.

Finally, South Africa held the top supplier spot between 1900โ€“1970. Its production peaked at about 1,000 tonnes annually, the most by any country in a single year.

Learn More on the Voronoi App

Need even more gold graphics? Good thing we have a few. Check out: Visualizing Gold Consumption vs. Domestic Supply to see which countries use the most gold.

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Charted: The Global Mining Industry, by Market Cap

Australia tops the list, with its major mining companies totaling $353 billion in market cap.

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This graphic breaks down the market value of the entire global mining industry.

Charted: The Global Mining Industry, by Market Cap

This was originally posted on our Voronoi app. Download the app for free onย iOSย orย Androidย and discover incredible data-driven charts from a variety of trusted sources.

This graphic breaks down the market value of the entire global mining industry, as of Jan. 16, 2025, using data from Companiesmarketcap.com.

Note that this data only covers publicly-traded companies.

Australia and Canada Lead

Australia tops the list, with its major mining companies totaling $353 billion in market capitalization. The country is home to two of the biggest miners in the world, BHP and Rio Tinto.

CountryCompanyMarket Cap (USD)
๐Ÿ‡ฆ๐Ÿ‡บ AustraliaBHP Group125B
๐Ÿ‡จ๐Ÿ‡ณ China China Shenhua Energy103B
๐Ÿ‡ฆ๐Ÿ‡บ AustraliaRio Tinto97B
๐Ÿ‡บ๐Ÿ‡ธ U.S.Southern Copper77B
๐Ÿ‡บ๐Ÿ‡ธ U.S.Freeport-McMoRan58B
๐Ÿ‡จ๐Ÿ‡ญ SwitzerlandGlencore55B
๐Ÿ‡ธ๐Ÿ‡ฆ Saudi Arabia Maaden49B
๐Ÿ‡บ๐Ÿ‡ธ U.S.Newmont48B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaAgnico Eagle Mines43B
๐Ÿ‡ฎ๐Ÿ‡ฉ Indonesia Bayan Resources42B
๐Ÿ‡ฒ๐Ÿ‡ฝ MexicoGrupo Mรฉxico39B
๐Ÿ‡ฆ๐Ÿ‡บ AustraliaFortescue36B
๐Ÿ‡ฌ๐Ÿ‡ง UKAnglo American37B
๐Ÿ‡ง๐Ÿ‡ท BrazilVale37B
๐Ÿ‡จ๐Ÿ‡ณ ChinaZijin Mining57B
๐Ÿ‡ฎ๐Ÿ‡ณ India Coal India27B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaBarrick Gold28B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaWheaton Precious Metals27B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaNutrien26B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaFranco-Nevada24B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaTeck Resources22B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaCameco22B
๐Ÿ‡ฌ๐Ÿ‡ง UKAntofagasta21B
๐Ÿ‡ฎ๐Ÿ‡ณ IndiaVedanta20B
๐Ÿ‡ท๐Ÿ‡บ RussiaNornickel18B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaIvanhoe Mines15B
๐Ÿ‡จ๐Ÿ‡ณ ChinaYanzhou Coal Mining15B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaKinross Gold13B
๐Ÿ‡ฆ๐Ÿ‡บ AustraliaNorthern Star12B
๐Ÿ‡ท๐Ÿ‡บ RussiaSeverstal11B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaFirst Quantum Minerals11B
๐Ÿ‡ฐ๐Ÿ‡ฟ KazakhstanKazatomprom10B
๐Ÿ‡ฆ๐Ÿ‡บ AustraliaSouth3210B
๐Ÿ‡บ๐Ÿ‡ธ U.S.Royal Gold9B
๐Ÿ‡จ๐Ÿ‡ณ ChinaGanfeng Lithium9B
๐Ÿ‡ธ๐Ÿ‡ช Sweden Boliden8B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaAlamos Gold8B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaPan American Silver8B
๐Ÿ‡จ๐Ÿ‡ณ ChinaTianqi Lithium7B
๐Ÿ‡ฆ๐Ÿ‡บ AustraliaEvolution Mining7B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaLundin Mining7B
๐Ÿ‡ฎ๐Ÿ‡ณ IndonesiaNMDC7B
๐Ÿ‡จ๐Ÿ‡ฆ CanadaLundin Gold6B
๐Ÿ‡ฎ๐Ÿ‡ฉ India United Tractors6B
๐Ÿ‡ฏ๐Ÿ‡ต JapanSumitomo Metal Mining6B
๐Ÿ‡ฒ๐Ÿ‡ฝ Mexico Fresnillo6B
๐Ÿ‡ต๐Ÿ‡ฑ PolandKGHM6B
๐Ÿ‡ฟ๐Ÿ‡ฆ South AfricaHarmony Gold6B
๐Ÿ‡ฌ๐Ÿ‡ง UKEndeavour Mining5B
๐Ÿ‡ฟ๐Ÿ‡ฆ South AfricaImpala Platinum5B
๐ŸŒ Global TotalAll Companies Combined1.4T

Rich in minerals, Australia is the world’s largest producer of iron ore, essential for steel production, and lithium, a key component in batteries.

While Canadaโ€™s economy has struggled to keep pace with its southern neighbor, its mining industry remains formidable.

The countryโ€™s mining sector has a combined market capitalization of $344 billion, making it the second-largest globally.

Canada, the worldโ€™s second-largest country by area after Russia, has vast natural resource wealth. It is particularly rich in gold, copper, nickel, and potash.

United States with miners totaling $228 billion and China with companies totaling $206 billion come in third and forth, respectively.

Learn More on the Voronoi App

If you enjoyed this topic, check out thisย graphic showing the number of mines that must be developed to meet the expected demand for energy transition raw materials and chemicals by 2030.

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